On September 24, 2019, Boston Private and The Chertoff Group convened nearly 60 family offices for a fireside chat on disruptive technology. The event, held in New York, brought together a panel of luminaries in the disruptive technology space: Michael Chertoff, the former Secretary of the U.S. Department of Homeland Security and now Executive Chairman and Co-Founder of The Chertoff Group, and Laurence A. Tosi, former COO at Merrill Lynch and former CFO at Blackstone and Airbnb.
The discussion focused on the unique opportunities and threats of emerging and disruptive technology, and how geopolitical factors underpin, and sometimes undermine, the opportunities disruptive tech presents. The panel discussion was hosted by Edward V. Marshall, Managing Director and leader in the family office practice at Boston Private.
Anthony DeChellis, CEO of Boston Private, welcomed the group and discussed the firm’s focus on hosting forums that allow family offices to connect with one another and hear unique insights from leading experts across a variety of relevant topics.
“That’s what tonight is about: bringing together a small group of knowledgeable and experienced people to share thoughts and ideas on some of the most pressing issues that family offices face to hopefully enhance our understanding and improve our chances of success.”
Nick Savasta, CEO of Mercury Capital Asset Management, added “Secretary Chertoff and Laurence are the world’s leading subject matter experts on cybersecurity and the sharing economy, respectively. Through their private equity groups, they are capitalizing on two of the fastest-growing and most dynamic sectors of the global economy.” Mr. Savasta is also on the Board of Tosi’s Growth Equity firm WestCap.
The discussion was wide-ranging and explored topics including:
The evolution and erosion of privacy. Michael Chertoff described the way technological advancements have been creating new data sets on individuals, beginning with photography, wiretaps, the internet, and eventually artificial intelligence (AI) and the internet of things (IoT). He indicated that privacy legislation has not caught up with the changes in technology, which has the potential to create problems for the public related to unbounded collection, storage, analysis and use of ever-growing data sets by private corporations.
Cybersecurity as a barrier or catalyst for disruptive technology. Secretary Chertoff and Mr. Tosi discussed the challenges that cybersecurity presents to disruptive technology — where it can act as a hindrance to tech progress or as a disruptor itself.
Mr. Tosi discussed how it often takes a cybersecurity incident for an organization to change its posture towards a problem. He opined that with increased regulatory scrutiny on breaches, and with more at stake due to growing sets of personal and sometimes private data at these companies, that a more proactive cyber stance should be taken.
Secretary Chertoff indicated that family offices tend to be more vulnerable to cyber-attacks due to a lack of clarity on potential threats and how best to defend against them. He recommended that family offices go through a regular cyber and privacy “check-up” with professionals skilled in identifying potential gaps and recommending effective risk- and threat-mitigation capabilities.
Artificial intelligence & family offices. Both Secretary Chertoff and Mr. Tosi discussed the potential upsides and downsides that artificial intelligence poses to family offices. On one hand, the analysis that can be obtained from AI can provide unique insights by augmenting evaluations that previously were nearly impossible because they would have required an overwhelming amount of manual work and resources.
AI may lead to potential government privacy issues, as with “social credit” systems, but also creates opportunities for private and public sector companies to more effectively monitor for insider threats. Mr. Tosi indicated that AI provides opportunities for continuous monitoring technologies to transform how HR departments and corporations monitor employees who may be starting down a path that creates problems for them and a company (e.g., unreported DUIs, major bankruptcies, etc.)
The evolution of disinformation. The panelists also provided their thoughts on the evolution of disinformation and “fake news” stemming from disruptive technologies. Regardless of how sophisticated, new technologies run the risk of creating or distributing false information. Michael Chertoff indicated that education is critical to addressing fake news, noting that students need to be taught to be critical evaluators of information, beginning at a young age.
Secretary Chertoff and Mr. Tosi closed the session with their advice on how family offices can potentially capitalize on and invest in emerging and disruptive technologies. Mr. Tosi noted the importance of evaluating technology based on its ability to solve a customer problem. Both Mr. Chertoff and Mr. Tosi indicated that private markets may provide the best avenue for investing in disruptive tech.
“Individuals and organizations are more vulnerable to cyber attacks today than ever before given the increasingly pervasive exposure of personal data and the extensive ways in which that data is collected, stored, transmitted and analyzed,” said Secretary Chertoff. “As a result, family offices should work to assess their current risk environment and take the necessary steps to mitigate potential threats to their family and business operations.” Chertoff continued: “The significant and growing demand for cybersecurity services also provides a unique opportunity to invest in companies with advanced technologies that can create safer environments for our families, organizations and global economy.”
“Disruptive technologies and businesses still need to master the fundamentals of building a scalable, profitable enterprise than can invest in successful innovation,” said Mr. Tosi. “This cycle will be remembered for private companies with outsized valuations that outgrew the experience of their boards and early investors and the capacity and skill of their founders.”
Since leaving government service, Michael Chertoff co-founded The Chertoff Group, a global security and risk management advisory and merchant banking organization that works closely with many family offices. He is also the author of Exploding Data: Reclaiming Our Cybersecurity in the Digital Age. Mr. Tosi now serves as the Founder and Managing Partner of WestCap where he invests in tech-enabled, disruptive businesses.
Boston Private was pleased to convene such distinguished leaders in the disruptive technology space.