Throughout the evolution of investing, there has been a "need for speed". Being able to efficiently value stocks depends on the information that is available about them - the more current the information, the better informed an investor's actions will be. Since the ready availability of the internet in home and work life, the speed at which investors receive information and the speed at which they are able to react to it has increased dramatically. This incredible pace would not have been possible without the information systems that powered Wall Street during its rise. In this article we will look at the history of the information methods and machines that helped shape the investing world.
Voices of Investing Past
The scribe occupation used to rank up there with priests in the ancient world. Both professions were heavily involved in a type of higher purpose. Priests were able to hear the voices of gods, and scribes kept the voices of the dead echoing on stone, clay and parchment. As education expanded, literacy spread outside this elite population and to the general public. This killed the scribe's purpose, but it gave the average person a way to store history and memory for future reference. More importantly, for our purposes, it gave people a way to record debts and trade securities.
For the first few centuries of investing, most transactions took place on slates carried by brokers. This was an extremely cramped space for trading because each broker was a de facto exchange. Any security a broker carried could only be traded by that person, as cross-listing with another broker may end up with a single security being sold twice, thereby cheating one of the buyers.
In 1440, Johannes Gutenberg designed a system of movable type that led to the creation of the printing press. The first book he printed was the Bible, but his predecessor used his invention to feed all sorts of literature to the nations of Europe in the throes of the Renaissance. By the 1600s, the printing press and a new innovation, the stock exchange, were used to break the monopoly brokers had over the particular securities they listed. (Keep reading on this subject in The Birth Of Stock Exchanges and The Global Electronic Stock Market.)
Groups of brokers soon were pushing for an open market. They had been mailing some of the first press releases describing their securities to as many investors as they could. The printing press made it possible for these brokers to distribute pamphlets and insert them into the newly created newspapers. The main problem with the printing press - a problem that would be mirrored in the future with the internet - is that it allowed almost anyone to spread a particular message to the public without censoring or fact-checking.
Arguably, the South Sea Bubble, in which the U.K.-based South Sea Company's stock rose on rumor and speculation before eventually crashing into worthlessness in 1720, wouldn't have occurred without the help of pamphlet propagandists. The fallout of the South Sea Bubble caused the British to turn their backs on investing and gave other countries (and the colonies) the opportunity to steal the lead in financial innovation - one of many instances where the printing press changed the course of history.
American Financial Literature
Stephen Daye brought the first press to North America in 1639, and many more quickly sprung up in every major center. As things soured between the British Empire and the colonies, these American printing presses were thrown into high gear, issuing inflammatory pamphlets, declarations, bonds, stocks, prospectuses and, more importantly, money. (Find out how this affected the American colonies in From Barter To Banknotes and Cold Hard Cash Wars.)
The printing presses in the state of Massachusetts and in Philadelphia were particularly important to the world of investing. Massachusetts printed the first American currency and was one of the primary printers of documents that stirred revolutionary fervor. Benjamin Franklin, born in Massachusetts and relocated to Philadelphia, ran the other printing press. Along with the advocacy of both the use of paper money and the issuing of a bond that allowed Philadelphia to build defenses and a fire department, Franklin's press produced the first book on personal finance, "Poor Richard's Almanac" (1732), and later Benjamin Franklin's own biography, which was so widely read that it had a considerable impact on shaping the country's thinking on finance, entrepreneurship, industry and the many other factors that make up an economy.
The printing press helped to secure and settle many nations, and without it there would be no way for investors to trade, share a common exchange, or help invest in companies. Though it did help fire up a revolution in the colonies, it also helped both sides confirm their own status. America was left on its own to establish trade with other nations, tax its own citizens, run a railroad, and fight several other wars: one with the British, one with Barbary pirates, and one with itself. The stock exchange was free to blossom and grow in the new landscape, and the information systems that helped it grow are still evolving today.