Guest Lecture and Open AMA by Dr. Jimmie Lenz, Hosted by Prof. Luyao Zhang at Econ 211 Intelligent Economics: An Explainable AI Approach, Duke Kunshan University
Alright, so today we are very delighted to have Prof. Jimmie Lenz here for guest lecture. So he will talk about exciting topics in Fintech and Cybersecurity and also the master programs that he is now the director for. Dr. Jimmie Lenz is an experienced executive, lecturer, and scholar in the field of banking and capital markets. Jimmie is the Director of the Master of Engineering in FinTech and the Master of Engineering in Cybersecurity at the Pratt School, teaching Machine Learning, Blockchain, financial innovation, and financial products and services. All of those are very exciting topics. Starting his career as an equity and derivatives trader over 25 years ago, Jimmie found he reveled in fast-moving atmospheres that required both strategic thought and the ability to take immediate action, which is definitely what I admire and difficult skills to have at the same time. His successes propelled him into a number of senior management roles within the finance community including leading an NYSE broker-dealer with foreign and domestic operations, Chief Risk Officer and Chief Credit Officer at a top-three broker-dealer, and the Head of Predictive Analytics for one of the largest Wealth Management firms in the US. Global financial services firms and exchanges have engaged Jimmie to address issues related to strategy, analytics application, risk mitigation, and business efficiencies. This in-depth understanding of the capital markets industry has allowed him to provide crucial perspectives in foreign and domestic regulatory matters, including the presentation of findings to the Security and Exchange Commission.
Jimmie holds an undergraduate degree from the University of South Carolina, a Master of Science in Finance from Washington University in Saint Louis, and a Doctor of Business Administration-Finance from Washington University’s Olin Business School. Jimmie currently serves as an advisor to REIN Insurance and on the Board of Directors of Zen Blockchain Foundation. He frequently speaks and publishes on topics leveraging innovation, Machine Learning, Blockchain, and quantitative analysis and has a number of pending patents related to his work.
Today, we also invited Jimmie’s current student at the Fintech master program. This is Johnny Lai. He is a second year fintech student at Duke University. He has worked with Prof Jimmie Lenz on numerous projects. For instance, the Federal Deposit Insurance Coporation (FDIC) project they did in the summer. They have just finished up their capstone graduation project.
Q (Saad Lahrichi): Thank you very much for taking the time to come and talk to us. It’s been a real pleasure. And it’s really exciting to have to come to this class and talk about your programs. Thank you also, Johnny, for coming. I think you mentioned before that most of the students come from a mathematical background and the minors are Economics. So I’m wondering how about the rest of them? Our school DKU has a major called Data Science. It’s quite unique and new and we are studying some Math, Statistics, and Computer Science, but without any concrete background in Economics. So what do you think about that?
A (Prof. Jimmie Lenz):
It’s a great question and I’m so glad you brought that up. The rest of the students are coming from Business schools, Computer Science, Data Science… I would say all of their backgrounds are somewhat quantitative. In other words, if you were a literature major, you're probably going to be very challenged; But if you have a quantitative background, I think it's a little bit better. And it's a little bit easier to get into things. Understanding probability distributions, statistics, and math from an applied point of view and understanding, regardless of how you come to it, I think, is pretty important for a lot of the students. We do have a lot of students that are coming from other types of backgrounds, not just mathematics or engineering. And I would say, that's a good percentage of the people – it's not just 5%, it's like a lot of students, probably number two is either Economics or Finance. We have a lot of students coming from business schools, but they typically have a fair amount of math background, because you will take classes that are pretty quantitative. The very first semester you're taking programming classes, which we’ve changed a couple of times. As I said, we’re always changing the classes around programming and software engineering, so you can understand. We are pretty academically rigorous in a lot of the classes because we want to make sure that you understand how to apply things really well. We are always looking at what are the companies looking for. If companies are looking for people that have C++ and Python experiences, we’re going to do a lot of things in C++ and Python because I want you guys to hit it out of the park every day. When you guys do your internships, I want you guys to be able to hit it out of the park. We are integrating more and more of those kinds of things, but we want to give you a really good background in those and so we started in the beginning. But I think if you already have a little bit of that experience – the mathematical experience or quantitative experience, it’s going to be a little bit easier. What do you think, Johnny?
A (Johnny Lai):
I think there's a lot of varieties of courses. But model courses require you to have some quantitive skills, so I think having quantitative skills would definitely help.
Q (Jennifer Lee): I think my question for you is towards the beginning of the talk. You mentioned that it’s important to understand the regular’s point of view and get their regulatory exporter. I’m quite interested in this topic because I am on the track to be a regulatory and analyst at a bank. Through taking this Explainable AI class with Prof. Zhang, I am wondering if you know this decentralized finance is really going to interrupt traditional finance? So could you please explain your perspective on it?
A (Prof. Jimmie Lenz): That’s a great question. It is not going to put you out of your job. I think decentralized finance is already having a big impact. I would be very surprised if we don’t start seeing some of the very traditional banks start entering decentralized finance. And they cannot pass this up because it’s becoming too big and too popular. I think that probably before maybe the end of the first quarter we’re going to see one of the big banks coming out and they’re going to start customizing a digital asset. I would be very surprised if somebody like JPMorgan Chase or the city will do it first. I thought it’s going to be one of the Chinese banks but they’re backing off a little bit so I think it’s going to be maybe one of the big US banks that are going to custody digital assets. So I think that’s where it will start, and they will start getting involved because decentralized finance is just too big that they cannot pass it up. I don’t think it’s going to put the traditional banks out of business but what I do think is it’s going to take away some of their business. So they’re going to have to get involved. And especially entering from a regulatory compliance side of things in a more traditional finance company, those roles are changing very quickly. I think you have to be much more proactive than they’re being right now. One of the problems that I think a lot of traditional financial companies have had is that they have been reluctant to really spend what they need to spend on total system upgrades and things along those lines. When you look at some of the really old US and European banks, they really have not put the research and development money into upgrading their systems and things like that. I’m going to use an example from the US, just because it’s easier and more familiar. If you look at the US mortgage market five years ago, you know 85-90% of the mortgages were made by banks in the US. Now less than half of them are made by banks. The biggest mortgage provider here isn't even a bank – it's Rocket mortgage. They're not even a bank. And why is that the case? Well, it's because of technology. The fastest-growing brokerage firm in America is Robin Hood. Why is that the case? Technology. They were able to apply things that other people can't. Because of the antiquated systems and lack of investment in their infrastructure and you see this in cybersecurity, too. I see that the same lack of investment in infrastructure is a very significant thing. so I think there are a lot of opportunities. Maybe we can start looking at things in a little bit different way – maybe it's not replacing hope for banking systems and things like that. But I think for people that are interested in the regulatory and compliance side of things, this is a time where creativity is going to be rewarded in a really big way. Doing things the way that it was done, five years ago isn't going to work. So I don't think it's going to put you out of business, and I think that you will see traditional financial services companies entering that business, though.
Q (Luka Mdivani): First of all, thank you for taking your time and giving such an interesting talk. You also mentioned that you are the director of the Master’s program in Cybersecurity. I want to ask what kind of backgrounds are students enrolled in the program?
A (Prof. Jimmie Lenz):
Good question, Luka. The students in Cybersecurity are different. A large percentage of them have experience in the workplace I would say. Probably about 40% of the students have experience in the workplace, and the others are coming straight from undergrad. They come from a variety of backgrounds
The students in cyber security are different, they have a larger percentage have experience in the workforce, I would say.
Probably about 40% of the students have experience in the workforce, the others are coming straight from undergrad they come from a variety of backgrounds, so the cyber security students tend to have a little bit broader background. Right now we have students from India, Kazakhstan, Peru, and the United States. Of course, we also have students from Canada and China. We have students from a very broad area and some of the students have experience in the government; one of the students worked for a State police agency for about five years before he came to the program; We also have a fair amount in cybersecurity space. We have a couple of people with Military experience that came directly into this; We have a couple with technology backgrounds in the industry that are coming into the program; And then we have people coming straight from undergrad too. So I would say it's more of a mix of people with some work experience that are coming into the program. Cybersecurity students are very passionate about what they're doing. We asked all Fintech and Cybersecurity students “what do you think you want to do when you graduate”. There's a pretty broad spectrum: for cybersecurity students, the spectrum is a little bit more narrow. They tend to be focused on a couple of more specific areas. I think that that may be because there are not as many students. We're just in the first year of that program. We're already talking about expanding one of the classes. Two of the people that teach in the program – one is the chief information security officer for Duke University and the other one is the chief information security officer for Duke health, which is one of the largest healthcare providers in the state of North Carolina. His previous job was teaching cybersecurity at the US naval academy and he and I have been talking about increasing some of the opportunities for students to work in an on-campus lab.
C (Prof. Luyao Zhang): So is there any connection between the Cybersecurity and FinTech program? Because you know, like blockchain is the trust machine in cyberspace, so there must be some connections.
A (Prof. Jimmie Lenz): There are definitely some connections and we have students that come across that. You can take classes from other disciplines. You're a student in the cybersecurity program doesn't mean you can't take classes in other disciplines if the professor approves. And FinTech students can take some classes in Cybersecurity, like secure software development. The interdisciplinary class I mentioned is popular in both. There are some cross disciplines in blockchain, in particular. One of the latest developments that we're starting to see in practice a little bit more is zero-knowledge proofs in the blockchain space. And so we're also starting to see zero-knowledge proofs be introduced a little bit more in the fintech space. So I think some of the emerging technologies that we're seeing in cyber security, we're also going to see in fintech and vice versa. I think there is going to be more and more overlap as time goes by because we are starting to see some really interesting things being developed. In the blockchain space, but in other spaces too, that's something that I think is going forward: more of that interdisciplinary classes between the two different majors.
Q (Cara Wang): Thank you very much for the talk. I was actually very amazed by the dynamics of the curriculum you just mentioned. When Students want something you can just set it up for the students to go into various industries and I really appreciate it. And I'm having a question. I feel like there's a variety of students that you are cultivating – like most in the technical sense and in the business sense. And you also integrate more about the cutting edge technologies like blockchains, like decentralized finance. But what exactly did the students go into? Or what exact industries or job titles did the graduate students actually go into?
A (Prof. Jimmie Lenz): Our first class is just graduating so I can only tell you about people who have got jobs so far. I talked to a student and he's already received five job offers. He received job offers from some of the companies but I can't remember all of them; I know he received offers from Deutsche Bank, Fidelity, RBC (Royal Bank of Canada), etc. He also received it from a money manager and one other place that I can't remember where, and he's probably going to take the money manager in California. We also have another student who just took a position, a data science position with a large industrial firm in Connecticut. Both of those were students that were originally from China. We have another student who is taking a more of a fintech, cutting edge type technology job in California; We have another student who is taking a consulting job in Chicago. Those are all the ones I remember, and I know there are others. And we also have one guy who can't seem to make up his mind, but I know he's received a couple of offers. And that's just one of the interesting things though you bring up something kind of interesting. As I mentioned before you know we asked students what they think they want to do when they first come in. When we first give everybody a survey, what do you think you want to do, nobody says consulting. Nobody says consulting and when people are starting to graduate, they are getting close to graduation several and some of them applied for consulting roles. I know one accepted a consulting role in Chicago with a big firm. And a couple of others are looking at those I never expected. That was something I just didn't think at all, but he was really taken with it. So we'll see what happens. And so far I think everybody is working here in the United States but they're all over the United States.
Q (Yihang Fu): I have a very interesting story. I was just discussing the topic of DeFi or blockchains with my uncle who is running a cybersecurity company in Shanghai and I just wanted to show off what I learned in the course. But my uncle quite doubts the concept of blockchain technology of blockchain and DeFi. So I’m just wondering what is your opinion about the biggest challenge of blockchain technology and how can we make these kinds of technologies real or make them more practical?
A (Prof. Jimmie Lenz):
I think the problem, both the great thing and the terrible thing about blockchain is that it’s so new. We forgot how new it is. It is only a dozen years old. People always ask me about blockchain 1.0 but we are not even at blockchain 0.5. If you go to the DeFi platforms and stuff like that, you will know that they are so bad. Their customer interfaces are terrible, the user experiences are bad. You know the exchanges are okay if you go back to finance or you know coin base here in the US, but they’re still not great. If you go on to any of the DeFi platforms like Meta Mask, Sushi Swap, or anything like that, you will see those are terrible and they are really hard to use for most people but they are still that popular. When I see people, especially very experienced people and they are usually older, say, they’re never going to catch on. How can you say that we have trillions of dollars in the device space and it’s really hard for people to use? So I think that over the next few years we're going to see some good-view user interfaces start to come out. I always ask people what puts a PC back when you step PCs on people's desks and what puts a PC on everybody's desk. You know what it was, and this is just my opinion. Okay, but what I think puts a PC on everybody's desk, Windows 95. It was the very first operating system that was used really broadly and you didn't have to know how to do anything, all you had to do was point and click. That's where we need to be to define. It's still really early and it's hard to use but millions of people are still using it all over the world. And so I think that's where we have to go. I think I'm creating those really nice user interfaces, that's a huge opportunity for people now. So when I see people in finance saying oh don't ever catch on it's like it's already caught on. And it's hard to use and people are still doing it um so I’m guessing your uncle in Shanghai is an older guy and so he probably thinks like an old guy. But if you think about it in terms of how many people are already using the fly and how much money is flowing through it and how hard it is that's a sign of how much people want to use it.
Q (Xiaoyu Wang): Thanks for your impressive work in this speech. In this course, we have learned a lot about the blockchain and cryptocurrencies and also DeFi and follow with the current question, I also have a question about the gas fee in DeFi. Centralized exchanges and transaction fees are pretty low and then people can do a lot of transactions, without considering the cost, but in DeFi the situation is different. As the number of users and transactions is increasing, the gas fee has also increased multiple times compared to what it used to be several years ago. So my question is, do you think this will somewhat prevent the development of DeFi production in the future?
A (Prof. Jimmie Lenz): It's an interesting question and I know you're talking about a theory of a stickler. I mentioned that we had Joe Lubin at a seminar a few weeks ago, and he was the Co-inventor of Ethereum that he runs consensus on. And so I asked him that question. I asked him exactly that same question. “Are you afraid that the cost is going to slow down development?” And his answer was unequivocal NO. And he said I don't think it will. Now between you and me, I have a little bit of a different opinion. I don't think it will, but I think it might slow down development on Ethereum and I think we may see more people go into places like Polygon and things like that that don't have as big a fee. Because I mean, let's face it. All of us do things because it's cheaper. We go shop, why do you go to Alibaba, why do you go to Amazon, because you can find cheaper stuff. So people are going to look for cheaper alternatives as long as we think the quality is the same and we can get the same service. I think you're right, I think we are going to see some pushback. We're already seeing some pushback but the Ethereum is still really big and I, you know, I was kind of surprised that Joe was not apologetic at all. I asked him what his thought was and he said that you know the market was decided that that was okay. And so, his feeling is that the market will decide when it's too expensive.
Q (Xinyu Tian): Hi, Prof. Jimmie Lenz. Thank you so much! I think this talk is very fantastic because we covered so many topics about the FinTech and Cybersecurity master programs in Duke and also some career paths. Because I personally will apply for my graduate program next year and the FinTech program is one of my targets, I really want to know if we undergraduate students right now are able to take the advanced graduate courses? Because I think you have mentioned there are a lot of courses about blockchain and other advanced topics and I’m going to Duke next year.
A (Prof. Jimmie Lenz): Yes, undergraduate students can take some of the FinTech courses now if there’s space and the professor allows it. I will be teaching blockchain in the spring and I probably have 10 undergraduate students in the class. They come from different schools, some come from Trinity’s, some come from Computer, and some come from Engineering. We have four-plus students who are undergraduates taking some of the graduate school classes. So, yeah, undergraduates can take some classes in FinTech and in Cybersecurity. We encourage it. I love having undergraduates in the classes, they always do well. You know if you're a senior undergraduate, you're only a year away from being a graduate student, so you're always doing well in the classes. In fact, last year I used an undergraduate student as a TA in my blockchain class and he has now graduated and he's now working at Apple in Austin Texas. I'm very happy to have undergraduates in classes and most professors, I think, like that.
IMMIE LENZ ON WHY AN NFT MAKES FOR A MORE SECURE, VERSATILE DIPLOMAL: https://today.duke.edu/2022/05/jimmie-lenz-why-nft-makes-more-secure-versatile-diploma
DeFi: Reinventing Finance and Expanding the Possibilities: https://medium.com/sciecon-ama/defi-reinventing-finance-and-expanding-the-possibilities-b08fd17c51f8