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Making
things happen - with integrity. A weekly CyberMemo designed to keep you on task. Monday, May 1, 2000 Volume II Number 18
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FOCUS - Smoke Signals
Wall Street is synonymous with American finance.
Though few of us have ever visited the historic downtown Manhattan building at Wall Street and Broadway where the New York Stock Exchange trades every business day, most everyone understands that “Wall Street” is where the nation finances the most robust economy in the world.
It’s been true for most of American history. Investors capitalized the first American banks. Then the railroads. Then steel. Rubber. Glass. The light bulb. Shipping. Real estate. The telegraph. Consumer goods. The automobile. The airports. The Interstate.
Not that long ago, the market’s performance was barely a footnote to the evening news. Primarily because institutions did most of the trading - major wire house brokers, mammoth pension funds, mutual fund managers and the very wealthy.
Now, everyone has a piece of the action.
Market news is frequently the lead story.
New York did not become the recognized center of financial activity until the Civil War. Before 1860, most trading took place in the city of brotherly love, the home of the Declaration of Independence and the Constitution. If the divided nation had not engaged in those terrible four years of bloody conflict, Philadelphia may well have continued on to this day as the focal point of American financial interests.
To finance that expensive war, the United States turned to American investors and thus New York. And sadly, ironically, investors enormously benefited from the war effort. Especially New York City. The Civil War made New York a boomtown.
Similarly, the financial benefits of warfare also proved true during World War I, World War II, the Korean War and the Gulf War. Generally, wars stimulate production. Energize the work force. Proliferate government contracts.
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The Vietnam War may be the only exception.
As predicted by the captains of American industry, Lyndon Johnson’s Military Industrial Complex grew during the Vietnam War. But this war failed to deliver the economic prosperity wars historically promise. It was fought by and protested by a divided generation.
In the Sixties and early Seventies, the new wave of American teenagers growing into young adulthood (the Baby Boomers) rebelled against the fundamental tenants of American business prowess, and set out to “make the world a better place.” The most popular college majors were sociology (Social Worker), political science (Anti-establishment Activist), psychology (Behavior Modification) and land resource management (Forest Ranger). If there were business courses, there was plenty of room to sign up during registration week. There were about as many Baby Boomer business majors as there were wannabe soldiers preparing for military service in ROTC (Reserve Officer’s Training Corps) classes. Next to none.
The markets did not capitalize on the Vietnam War. In fact, it would take nearly twenty years for the economy to recover from the turmoil associated with the cultural aftermath of this unpopular war.
Young and idealistic Boomers attempted to turn American “Imperialism” upside down. It was The Grand Experiment. They spurned the materialist values of a free economy, fought to be liberated from the rules and norms of a suffocating, stifling culture of Establishment, smoked dope to free the mind from the bondage of an “Ozzie and Harriet” suburban world where “Father Knows Best.”
Well, it didn’t really work. As those Boomers turn gray, it’s all turned out to be more a cause of late night comic relief than a global social revolution.
There aren’t many true believers left.
I hear there are some who roam the coastal towns of Santa Cruz (California) and Big Sur and the isolated backcountry where, in clandestine farming operations, far from the ominous threat of law enforcement, the illegal marijuana plant still grows. But for the most part, the beads and the flowers in the hair and the open shirt collars and the free love and the psychedelic Volkswagen micro-bus and the scruffy long hair bundled up in red bandanas and little wire-rimmed John Lennon sunglasses, well, all that has gone the way of bell-bottom pants.
The gentle philosopher lyricist John Lennon has been metamorphosed into the monster materialist clown Howard Stern. They may have a similar look – but they are on opposite ends of the cultural spectrum.
In a cultural about face, most of the Woodstock crowd has turned about in a one-eighty and has, like the rest of the world, come running back to Wall Street with visions of New Wealth in their eyes.
Wall Street survives the doomsayers. The booms become busts then vice versa… the Bears overcome the Bulls and then the other way around… and Wall Street stands. From spectacular bankruptcies to staggering overnight wealth, Wall Street remains, golden.
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In order for Wall Street to work, buyers and sellers must have information. Accurate information. Timely information.
The distortion of information is perhaps the greatest offence of all. Volumes of codes and rules and laws restrict the abuse of information in the markets. Violations create fines and sanctions; and in some cases, impose prison terms.
This has been true from the beginning. And it can be argued that the market remains strong because the delivery of information is pure.
Clearly, some abuse this principle. We call them criminals. Not all criminals get caught. Some are so good at what they do, that their crimes are not even detected.
But the market strives for the delivery of fair, accurate and timely data. Weighty decisions are made, moment-by-moment, on the basis of available information. The market thrives when the information stays pure. Impure information ultimately destroys the whole system.
Buy and sell orders. Haggling price between a willing seller and a willing buyer. The validity of financial statements. These are the essence of value. Good information is the foundation of a reliable market.
A failure of communication, a perversion of information, either one will be devastating. Not only to a particular investor, but also to the market itself.
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The means by which that information has been transmitted throughout history is a fascinating study in communication technology.
Early on, pre-civil war, traders utilized flag signals for rapid communication between Philadelphia and New York. They borrowed the ancient method of seagoing vessels, and utilized the precise colors and patterns of flags. Held in two hands by trained signalers, information regarding trades and price was passed on from hill-top to hill-top on a visual line of sight. The “data” was relayed through hundreds of uniformed flag waving personnel over the eighty-two miles between the two cities. Start to finish: a record thirty-two minutes. Not quite “real time.” But it was a stunning achievement in rapid communication. The only enemy of timely information was fog.
It was the nineteenth century high tech equivalent of the Native American smoke signal.
In 1844, the first public telegram was sent via a single wire, an electromagnetic message in a series of long and short lines by Samuel F. B. Morse. By the time of the Civil War, Morse Code became the standard for information at the speed of light. Wires strung all over the country, delivering dots and dashes instantaneously… one letter at a time. The stock market, which became the crucial funding arm of the war effort, utilized the telegraph technology to communicate prices and trades.
The flags were dropped.
A hybrid of the telegraph was the ticker tape machine. Directly connected to the floor of the exchange, buy/sell information was transmitted via hard wire to anyone who could afford it. Under a glass dome, the high-tech contraption typed out in line on a streaming tape a confirmation of every trade on the floor. The printed tape resembled the financial data you see streaming on your favorite financial news channel at the bottom of your television screen. Prices stated in eighths, just like today. Investors now had hard copy at their finger-tips.
For decades, even centuries – when New York wants to bestow honor and appreciation on a favorite son, or a war hero, or an astronaut – the city calls everyone out for a lunchtime parade. Like, for example, the homecoming of the lone pilot of the single radial engine high wing airplane, the Spirit of Saint Louis, on the day he returned from Paris after that first airborne transatlantic crossing. Charles A. Lindberg hit the Big Apple - New York City.
It looked like a summertime snowfall. But raining down from the windows of high-rise office buildings were streams of paper. Every office in New York had a little glass-domed machine producing mountains of the one-inch wide line of paper every day. The paper shower was ticker tape.
The Ticker Tape Parade.
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As radio and telephones and financial newspapers became commonplace, Wall Street delivered information daily through these modern channels. Computers enabled brokers to link direct lines to the floor, and get real time quotes at their desks (Quotron). It was efficient, but expensive.
It has only been in the last few years that the Internet has made Wall Street information available to virtually everyone. Virtually for free. Real time quotes. Accessible trades. Research data. Market trends. Financial statements. Price-earnings ratios.
Look at the historic graphs. The Dow Jones Industrial Average, the S&P 500, the NASDAQ, the American Composite… all of them take a dramatic turn upward as information became widely available.
It can be argued that the delivery of accurate, pure, timely information is the key factor in the dizzying success of The Street.
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Leaders understand the importance of communication.
You are a leader. Your people need information. Accurate information. Pure information. Timely information.
They need to hear from you.
You’ve got all the tools you need right there within your reach. Think about it. You have e-mail. You have stationary. You’ve got that telephone right there on your desk – several lines to choose from. And that cell phone. That fax machine. That color printer. You’ve got voice mail. You’ve got a postage meter. You’ve got your address book (with home address, business address, e-mail address, pager numbers, mobile numbers, fax numbers, home phone and business phone with extensions).
That address information may be stored in your Day Timer, or your desktop or your laptop or your PDA. Maybe it’s in the Rolodex. Wherever you store it, you’ve got it.
There’s never been a time in history when the tools of communication have been more accessible.
Use them.
Take a lesson from Wall Street. Think about what it is your people need to know. Take the initiative. Get the word out. It’s an age of high tech. Be a leader who knows the power of high touch.
Make the message crisp. The signals clear. No smoke. No fog.
As you make those tools useful, watch what happens to your personal growth chart.
The day is coming. You watch.
They’ll shower you with ticker tape.
© Copyright Kenneth E. Kemp 2000
See the CNBC historical special based on the book by John Steele Gordon The Great Game : The Emergence of Wall Street As a World Power, 1653-2000
Special Thanks to my good friend David Belcher, owner of Rhino Media Group and creator of WisdomGram
LeaderFOCUS is a service of Good Stewardship Associates
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