Out of the Blue and into the Black: The Pursuit of Innovation and a visit to the DSM Biotechnology Center

The new Co-Operation

To glimpse at the future, let’s look at how financial markets operate now — as opposed to the past — and how they have changed.

Once, all investments were analog and person-to-person. To trade shares in Venture A, you found someone with shares in Venture B (or cash), and executed a trade.

Ultimately, the exchange developed. The New York Stock Exchange started as a tree near Wall Street where brokers, investors and financiers might meet. Trades were still person-to-person, and you still swapped shares in Venture A for shares in Venture B. Then came firm price quotations, and specialist firms who would buy your shares in Venture A, sell you shares in Venture B, and make a market in the shares on each. You could unload shares at any time. Markets became liquid. Ultimately, share-trading became automated — except in rare cases now, shares are traded without the use of specialists or specialist firms to make a market in the stocks. Trades are executed based on trading orders and parameters, computer-to-computer, that instantly translate demand and supply into a clearing price. Hence the occasional gyrations in price that demand shut-downs bring— such as panic.

The point is this. The system creates liquidity in a given product (shares) but thinks not, manages not, directs not, presides not. Investment portfolios — which are combinations of holdings of the capacity to produce technologies, products  and service— are created, modified and liquidated without recourse in the sense we usually have of “managing”.

Yes, there are day-traders and stock pickers. But wealth-creation for the vast majority is done by other means. Do you really know what funds your IRA is holding? What stocks, bonds, meta-funds and funds of funds are in those funds at this moment, in what ratio? Do you know what the management of the firms being held are announcing. What they are actively negotiating or planning. What they are contemplating. Or what might be possible for the that they are not yet contemplating? Yet, world finance does not collapse even if it is, by definition, built upon something that we might describe elsewhere as unconscious investment.