A Look At The Future

From: Doug Steiner
Date: July 1999

Re: Overuse of time machine

We used the time machine in our R&D labs (please don't tell anyone because they might want to use it to look at the stock pages in those new electronic newspapers we found). I brought a young MBA-type kid with me who wants to make a career in this business, and it seems that he has been able to figure out a plan for his future, too. We tried not to disturb anything, and we were only observing. Here's what we think we saw. Please plan your business units accordingly.

1. The cost of doing a trade looked like it had reduced to slightly more than a long distance telephone call, which seemed to cost the same as a local call.

2. eBay was trading equity securities right beside those turn of the century (21st that is) commemorative plates, which everyone seemed to collect and lose money on in late 1999 and early 2000.

3. There is no retail market. If you want to invest $400,000 for 22 days, retail investors seem to be paying the same price for all financial instruments, just as the big guys do.

4. There seemed to be no 'bad advice' attached to transactions as a fee or commission. The agent got paid slightly more if the client made money on a transaction and seemed to lose the account, or, at best, make nothing for lousy advice.

5. New issues are priced by the buyers, and not the old investment dealers (who look quite different). By the way, there was no commission because the issuers executed them directly to the buyers.

6. There seemed to be online communities around each specific asset. I wanted to know what was going on with the telecommunications companies, and it seems that they started their own financial services firms around 2002.

7. We saw an application that was just a button on what looked like a kind of web site that allowed for passive or active investing. The passive stuff looked like an order entry screen that you typed in size and hit the button, and it did the rest-- account maintenance, corporate actions, security maintenance, portfolio management and reporting, trading and fund accounting, all in real time.

8. The active investing button looked like an old stock trading application except instead of equity names, there were fund managers and their portfolios. You could just sell one portfolio and buy the other. Talk about an easy way to fire a manager.

9. The brokers didn't look as well paid as in the 1990s.

10. The good managers were managing buckets of money.

11. The volume reported from the all-linked matching engines for securities were north of 10 billion shares per day, about 1 billion shares per day in Canadian equities.

12. There didn't appear to be any stock exchanges or trading rooms.

13. There were a lot more financial instruments than five years ago.

One final note: please remember that this is confidential information. We don't want to let this out and give any of our competitors an unfair advantage.

Transcontinental Media G.P.