One year ago, we published an issue of Release 2.0 entitled “When Markets Collide” (download a PDF), in which we considered what Wall Street and Web 2.0 might have to teach one another. Quite a bit, it turned out: the key parallels we uncovered include latency (both have to do their jobs more or less instantly), connectivity (it’s the liquidity of Web 2.0), sensors and actuators (and how to use them), and reputation (stockbrokers are no longer curators — they’re rated).
So it’s a ripe time to consider the status of the relationship. What’s new? What’s changed? The amount of financial data available publicly is astonishing. That doesn’t mean it’s all useful. There’s plenty of data out there, but it’s plenty confusing. You can’t extract alpha until you understand what you’re looking at. As Michael Simonsen, president and CEO of Altos Research, puts it, “free data on the internet is a mess.”
If anyone doubts that financial markets and technology markets are deeply intertwined, consider this: the same day that JPMorgan Chase revealed its “purchase” of Bear Stearns, a Gartner Group analyst released a report showing that “the financial services industry continued to lead all vertical markets in server revenue, as it accounted for 25.3 percent of worldwide server revenue in 2007.” As goes one set of markets, so goes the other.
In this issue of Release 2.0, we consider the Wall Street/Web 2.0 mashup from a number of angles. We talk to Paul Kedrosky, chair of our Money:Tech conference and an influential blogger on the topic (as well as others), about why some on Wall Street hate Web 2.0 — and what Web 2.0 can do to infiltrate Wall Street nonetheless. Entrepreneur Marc Hedlund, now chief product officer for OATV-funded personal finance startup Wesabe, examines what happens when hidden data gets surfaced. Cathleen Rittereiser talks to hedge fund managers to discover what they want from Web 2.0 — and what they’re actually getting. Longtime Radar contributor Nathan Torkington digs deep into prediction markets and spells out both how to manage them and what companies can gain from implementing them.
It’s a truism that alpha lasts longest when it’s hidden. That may have been true in the past, but the growing use of Web 2.0 tools means that less data will stay hidden, and what’s hidden will stay hidden for a shorter period of time. As James Altucher of Stockpickr said at Money:Tech, “When it comes to data nowadays, closed source is a myth.”
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