Time to Strengthen and Decentralize Markets and Economic Networks
It's clear that the U.S. economic system was too easily paralyzed by an attack on a relatively small area, the lower Manhattan tip.
Too much was dependent on the physical facilities of the NYSE. Too much was dependent on commuters all arriving at a particular building.
The NASDAQ exchange is a better model. Even more sophisticated price-signalling markets are also possible. (Alternative auction models, efficient electronic markets, perhaps with some involvement of specialists as in the NYSE market maker system.)
As we all know, the popular legend is that "the Internet was built to withstand a nuclear war." (Only partly true, for reasons I won't go into here. But work on distributed, packet-oriented networks was a priority for ARPA for a lot of reasons.) Whether the Internet was built to withstand or a nuclear war, or whether it _would_ withstand a nuclear war, it is unfortunate that the nerve center of the U.S. bond and equities market was so vulnerable to this act on Tuesday.
It's time to modernize our financial networks. Too bad the NASDAQ didn't offer to begin carrying NYSE trades, too bad they didn't announce in their press conference yesterday that they were merging and that the NYSE would be migrating to a more distributed electronic quotation and auction system.
(Instead, we have Dick Grasso, top dog of the NYSE, telling us about efforts to get the rubble moved out of the way so that floor traders can get back to the physical building. Evidence of way too much centralization.)
This applies to Wall Street firms as well. Way too much centralization into one district of one burrough in one city. By contrast, Intel chose nearly 30 years ago to decentralize to multiple states so that a catastrophe in one region (an earthquake, more than likely) would not cripple the entire company.
And there are other reasons for Wall Street firms to now do this. Firms are already scrambling to find replacement office space: 10 to 15 million square feet of office space has been removed from the market in NYC. (50,000 workers, less the 5,000 likely dead, less the firms like Cantor Fitzgerald which were so devastated they may not survive, plus new hires to replace the dead, for about 40,000 or so people who will need to be housed in offices.)
A bold move would be an announcement by a major brokerage firm that it is moving its core operatons to, say, San Francisco or L.A. Better yet, that it is splitting its operations into multiple pieces. (And I mean more so than having branch operations, which all of them do.)
Even better, a move to efficient, distributed, electronic markets.
Note on my comments: I'm not commenting on the attack itself, the terrorists, the bin Laden involvement, increased security at airports, how all of this was forecast many years ago, the moral issues of Israel vs. the Palestinians, and so on. The "Intel" thread of "Silicon Investor" is not the best place to rehash oft-discussed things like this, in my opinion of course.
When I see the powerful technologies companies like Intel have deployed, and the capabilities for efficient markets, for video conferencing to lessen business travel, it just astounds me to see our financial markets paralyzed by the inability of floor traders from New Jersey, Connecticut, and Long Island to get into one particular rubble-strewn area that houses the New York Stock Exchange. It's the 21st-Century equivalent of meeting under the Buttonwillow tree.
Time to move into the future.
--Tim May |
