When you clicked the link that opened this page, it took about 50 milliseconds for your computer to establish contact with this website.
For reference, it takes about 200 milliseconds to blink. About a second after the initial handshake, these words appeared on your display. When you factor in all the code and pictures that make up this page, there’s about 100 text-pages worth of information in front of you right now. That’s a ton of information accessed incredibly quickly.
It’s very easy to forget that it wasn’t always this way—even as recent as 15 years ago.
Before the internet, it took a long time for information to move around the world. Sure, we had televisions, telegraphs, and telephones, but there were all low-bandwidth and only carried a specific type of signal.
In fact a 1-millisecond advantage in trading applications can be worth $100 million a year to a major brokerage firm.
Faster, higher quality information has always led to the potential for faster, higher quality decisions. Throughout history, knowing the price of a commodity or the outcome of a battle a few days or weeks before the competition could create fortunes and save lives. Today, having similar information a few milliseconds faster might do the same. This is just a continuation of a 3,000 year process of information delivery acceleration – and the business profits that it enables. Forget the bold, fortune favours the fast.
Fast is getting faster, faster.
At the height of the British Empire it took at least 6 months for a ship to travel from England to Hong Kong, a core trade route for opium, raw materials, tea, and silk. Traders with advanced knowledge of sinking ships, droughts, changing trends, or war could anticipate massive price fluctuations and corner markets to their immense profit. Often times competing ships would be racing neck-and-neck to relay new information, with savvy ship captains flying flags that could be spotted by commodity speculators, getting the message there that much sooner.
The faster people had information, the faster they could buy or sell, and the market began to pick up speed. The wireless communications of the 19th century were, among many other things, a market accelerant. The telegraph was followed rapidly by radio, telephone, television, cellular phone, satellite and fibre optic cable. Both modern businesses and modern customers have many channels to choose from to make smarter and faster decisions.
Retailers for instance have discovered that if their websites don’t load quickly customers don’t hang around. Internet shoppers have gotten used to speed so much that they only really notice it when it’s gone. Bidders on eBay have, for a while now, used software to automatically slide in winning bids at the last possible moment of an important auction.
While consumers are using speed to their advantage effectively, financial services companies are taking it to a whole other level. Financial services industries have invested billions in speedy communication infrastructures and lightning fast computers crunching numbers and automatically trading stocks based upon financial models. Not only are they trading based upon changing inputs from the material world, but often they are trading based upon miniscule differences in stock or commodity prices in financial systems.
Internet shoppers have gotten used to speed so much that they only really notice it when it’s gone.
It takes a bee about 5 milliseconds to flap its wings but in the brokerage industry high frequency stock traders who can access information that much faster make a fortune in the stock market by trading with that velocity. In fact a 1-millisecond advantage in trading applications can be worth $100 million a year to a major brokerage firm. Often firms will pay a premium to have their server positioned physically adjacent to the servers of major stock exchanges, or spending hundreds of millions of dollars to install dedicated high speed networks.
At a certain point, it’s impossible to get any faster: the universe has a physical limit on how fast a signal can travel. But getting information quickly is only the first step, acting on it both quickly and intelligently is the next, and possibly greater, challenge. Both customers and companies are going to need to develop new strategies for coping with a world where every event, near or far, is happening in real-time.