While driving to Reading, Pennsylvania, earlier this week to visit Maestro Sidney Rothstein for a conducting lesson (more on Beethoven’s Prometheus Overture later), I tuned in to Bloomberg radio. The reporter was interviewing John Thain, CEO of the New York Stock Exchange (NYX), which had just started its first day as a public company. The interviewer asked about the possibility of the Exchange becoming “all electronic” to which Mr. Thain responded that the exchange is a very people oriented process, that people are required to balance the many buy and sell orders received and that the human element is essential and “that’s not going to change”.

Mr. Thain’s words immediately rang a bell with me. It sounded like ten years ago when the CEO’s of banks and brokerage firms (and Microsoft) were saying that the Internet was interesting but that it would never be used for banking or securities trades. Over the ensuing years financial services companies ran print advertising campaigns saying how important brokers were and how they provide advice from people you can trust. After the denial phase was over the firms couldn’t get into online trading fast enough and now Barron’s does in depth analysis of which securities firms have the best web-based trading and investment advice capabilities.
Computing power and networking speeds are accelerating rapidly beyond the already amazing capabilities of today. Computational biology has made it possible to decode the human genome years ahead of the projected time. Human proteins are being designed that may provide cures for cancer. A supercomputer defeated the world’s greatest chess player. Two robots are driving around the surface of Mars under computer control from Earth. But buy and sell orders for securities can not be modeled, optimized, and matched by computers? Is it possible that the financial services leaders are once again benighted about what is in front of them? Could it be that the jeopardy of profit margins and bonuses could blind them from seeing what is ahead?