Just over two hundred years ago, the Rothschild family fortune was supplemented by their access to information about the outcome of the Battle of Waterloo. Legend has it that Nathan Rothschild tried to share his information with the UK Prime Minister but the PM was resting. He then proceeded to the Stock Exchange where he cashed in on his information.
Rothschild’s advantage on the Stock Exchange was measured in days. Nowadays, advantage is measured milliseconds and nanoseconds. Diane Coyle says “New cables have been drilled through a corner of the Allegheny Mountains of Pennsylvania to bring Nasdaq’s serves in Carteret, New Jersey, a bit closer – three milliseconds to be exact – to photons originating in a data centre in Chicago’s South Loop. A new trans-Atlantic cable has reduced transmission times by 0.006 of a second, an improvement well worth the $300 million investment.”
The improvement in communication technology is phenomenal. Almost 50 years ago, an infamous betting coup was made possible by the fact that there was only one telephone line to a UK racecourse. The Gay Future episode has since made it to the silver screen and the Courtroom. I have heard another story from around the same time. Two workmates noticed that the clock in the bookies was slow. Spotting a potential opportunity, they ran outside and rang the telephone kiosk at a venue where a race should have just finished. After hearing the name of the winner, our two racing enthusiasts returned to the bookies, gathered whatever coins they had in their pockets, and placed their bet. A very small fortune was made. However, the value of the story is priceless. It lingers in family circles and beyond.
Technology is changing but the human motivation to make money, or to just to beat the system, is ageless.