Newt Gingrich, Light Bulbs and Market Disruption
By stern on Oct 19, 2008
Political contexts often remain invariant over time.
I used that quote frequently when talking about Java, networking, and the .com boom of the late 90s and how the ability to directly interact with customers, consumers and potential users of your product completely reshaped distribution, and that any company that chose to ignore those factors would become less interesting. It is, and was, a matter of perspective on massive market disruption: opportunity or threat.
Market contexts often remain invariant over time.
I won't whitewash the current financial crisis: the markets are a mess, and we probably won't know the true extent of the mess until the cyclic graph problem known as counter-party risk is sorted out, assets priced or auctioned, and some senses of liquidity restored to the credit markets. But actually traversing these graphs and identifying the risks highlights the opportunity, rather than the threat - we have a chance, as technologists, to create the infrastructure, tools, and data management mechanisms underlying any improved transparency in the financial markets. In the words of my ever-cranky buddy Geoff, if you want to understand the risk of a zloty-denominated futures contract on the price of oil in emerging markets to be delivered to Eastern Europe, you better have transparent market information for all of the intermediaries and end points.
The information exists, but it's not evenly distributed or acknowledged. That is, by the way, what William Gibson says about the future. With the .com boom, we had the good part first, then the correction; I'd prefer to think about the current credit market crisis as the correction preceding the next build-out of financial market infrastructure. Compute grids used for Monte Carlo simulation of interest rate and credit quality future-looking scenarios, often used to price mortgage-backed securities, will not be the sole banking infrastructure that rebuilds confidence and velocity in the credit markets. Those scientific HPC systems are going to be supplemented by data-rich, "commercial HPC" installations to examine systemic, structural and market risk based on transaction data, market data, and multiple sources of public data: less prediction and more counting.
Thinking anything less lets financial candle-makers extinguish the possibilities enabled by the electric light bulb.