recent piece published in Wired by finance blogger Felix Salmon noted the recent “rise of the quants” in fields as varied as the US intelligence system, political campaigning, and sports. Salmon describes the rise as the ascendance to power of people whose “native tongue is numbers and algorithms and systems rather than personal relationships or human intuition.”

Unsurprisingly, Salmon traces the genesis of this rise to the financial services industry of the 1980s—about the same time that consumers started receiving targeted offers for credit cards and other financial products “based not on the relationship you had with your local bank manager but on what the bank’s algorithms deduced about your finances and creditworthiness.”

The introduction of algorithms, Big Data analytics, and other quant tools into an industry naturally disrupts and changes the very nature of the industry, often with the quants emerging as victors—albeit temporary ones. Salmon describes what happens “after the quants win” as a system that creates “incentives for everyone to change their behavior in perverse ways—providing more of whatever the system is designed to measure and produce, whether that actually creates any value or not.”

Examples of this quantification “overshoot” include police departments meeting statistical quotas for arrests without improving public safety, school systems “teaching to the test” without providing a solid education, and Wall Street firms trying to maximize profits and managing risks within the “over-leveraged, hyper-quantified” banking system.

In Salmon’s thesis, “living by numbers alone simply won’t work” for smart organizations and that they need to combine quantitative tools and insights with experience and human intuition. He points to examples in quant wunderkind Nate Silver’s book The Signal and the Noise in which the Boston Red Sox combined new school Moneyball statistical tools with old-fashioned scouting know-how to capture World Series titles in 2004 (as well as 2007 and 2013). Silver also describes a similar synthesis at the National Weather Service where experienced meteorologists can improve forecasts by as much as 25 percent when compared with supercomputers operating alone.

As a startup financial technology and lending platform, Dealstruck strives to be as conscientious as possible as the opportunities offered by technology and data tools. At the same time, we want to complement our technology with a strong human element throughout the life of a small business loan and lender-borrower relationship. This runs the gamut from identifying and addressing the need in an initial consult with an applicant to structuring the right terms and risk management techniques during the underwriting process. It also includes efficient and effective servicing of the loan and the client after the loan has been originated.

For example, a recent client of ours had taken out a series of merchant cash advance loans to cover short-term working capital needs for his physical and speech therapy business. Generally, merchant lenders will analyze easily accessible bank transaction information and other data points to structure a short-term loan quickly and efficiently. The borrower was satisfied, at least initially, that he had a funding partner that was responsive to his needs.

However, what the merchant lender didn’t uncover was that a revolving line of credit would’ve been a far better solution to his ongoing working capital needs. An experienced Dealstruck loan officer diagnosed the issue quickly; the intermittent cash flow crunches were caused by working capital getting tied up in his customers’ invoices that took 30 days or longer to pay. It’s exceedingly unlikely that the borrower’s rep at the previous lender had the background to recommend a better solution—and even if the rep did, it’s guaranteed his employer wouldn’t want him pitching a product they didn’t offer!

Instead of plugging his cash flow gaps with high-cost, short-term loans, the client switched to Dealstruck’s revolving, asset-based line of credit that gave him the ability to draw funds when he needed them instead of being stuck with high monthly payments even when the cash flow need wasn’t present. Ultimately, the borrower had a solution that was cheaper and a better fit to his needs while Dealstruck had a far more secure financing solution in place than what the client had been using. Technology enabled us to arrive at the underlying financing issue more quickly, while an experienced human element recommended the optimal solution.

Synthesizing technology with an experienced human guide in order to make better credit decisions for both borrowers and investors is a core mission of Dealstruck and one we aim to spread widely in the small business lending market.