Learning from Financial Markets (Money:Tech, Part One)

I mentioned the Release 2.0 issue on Web 2.0 and Wall Street in my post about Warren Buffett yesterday. I thought I’d take up that theme a bit further, and explore some of the big ideas that fall out of the realization that Web 2.0 and Wall Street are both networked information markets.

The first key insight was that if the parallels between Web 2.0 and Wall Street are correct, we can divine some of the future Web 2.0 trends by watching what’s already happened on Wall Street. Financial markets are both much bigger and much more valuable than Web 2.0, and have been around a lot longer, but show many of the same patterns. Over the next few weeks, I’m going to publish a series of posts about some of the key ideas that really woke me up when I started exploring the parallels.

Here are some of the topics I’m going to be covering:

  • What Wall Street (and Google’s) quest for performance tells us about the re-centralization of the internet into massive data centers
  • How trading via “dark pools of liquidity” may give a foretaste of an internet where secrecy is valued more than transparency
  • How Wall Street firms increasingly “trading for their own account” rather than on behalf of clients predicts and explains many of the current strategic moves by Google and Amazon
  • How the breakdown of traditional investment research is creating new opportunities both for aggregators of unique types of internet data and for a new class of investment research firm

  • How innovative Wall Street firms are “harnessing collective intelligence” for trading

  • How the recent sub-prime meltdown might suggest futures in which internet-style collective intelligence applications could also run out of control

  • How the development of real-time data sources can also lead to the development of new financial instruments (e.g. weather futures), and potentially, new sources of revenue for companies aggregating that data

In addition to this series of blog posts, we’ll be exploring all this and more at the Money:Tech Conference in New York February 6-9. (See also my original post about the conference, back in August.)