Thirty years ago, Wall Street was an industry where monopoly prices on trading subsidized other products. Today, the shift to intense competition in providing commodity trades has led to the use of information as a source of competitive advantage. A similar change is underway in the Web - the shift to Web 2.0. This entertaining discussion between two Wall Street veterans covers some of the changes that took place on Wall Street, with insights into how similar changes might happen on the Web.
When regulated prices for trades were ended, Wall Street firms had to compete to provide the best and fastest service on trades. In the current trading environment, consumers can make trades over the internet in a couple seconds, while hedge funds and others are competing to be as close as possible to the stock exchange so they can have sub-millisecond trades. This is similar to how Google focused on extremely fast searches and has been successful with that.
The other major shift was the use of original research to create profits. When trading prices were artificially high, one of the services funded by the extra profits was research, used to recommend trades to clients. When the research was no longer subsidized by trading prices, it did not survive as a product to sell, but was used by investment banks and hedge funds that used that research to make their own investments. Google and other sites that collect internet usage data are in a similar situation, deciding when and how to use that data to profit.
Bill Janeway is a senior adviser at Warburg Pincus, Bill's experience encompasses over thirty years of practical finance in investment banking and venture capital. On joining Warburg Pincus in 1988, he initiated and managed implementation of the investment strategy for Information Technology that established the firm as a global leader in the domain, including funding from start-up such prominent providers of infrastructure software as BEA Systems and VERITAS Software. Bill is a member of the Board of Directors of BEA Systems, Inc., Fortent, O'Reilly Media Inc., Nuance, Inc., NYFIX, Inc., and Wall Street Systems, Inc.
Peter Bloom is a Managing Director at General Atlantic LLC, where he has worked since 1996. General Atlantic is a leading global private equity firm providing capital for growth companies driven by information technology and differentiated intellectual property. Peter is responsible for technology due diligence on prospective investments, assistance to the CEO and senior management teams of portfolio companies on technology strategy and guidance on emerging technology trends. Prior to joining General Atlantic, Peter spent thirteen years at Salomon Brothers in a variety of roles in both technology and fixed income sales and trading. While at Salomon Brothers, Peter received the Carnegie Mellon/AMS Achievement Award in Managing Information Technology for his work managing the technology implementation of a new distributed computing architecture that supported the company's global business operations. Peter graduated from Northwestern University in 1978 with a B.A. in Computer Studies and Economics. He is currently the Chairman of DonorsChoose, which was recently named the most innovative charity in America by Stanford Business School and Amazon.
This free podcast is from our Emerging Technology Conference series.