Thorough, patient, methodical analysis typically enables success, I was always taught, but who has time anymore?
The Internet can disseminate breaking news in milliseconds around the world, and your phone rings almost simultaneously, with a “what should we do?” The luxury of days to study an issue, are long gone. Even instant analysis takes too long. Instead, to succeed, you’ll have to cheat time, almost work on negative time, anticipating rather than analyzing and reacting to sudden events.
“Intel on the tape,” I hear on my way out to lunch. “Damn, here we go again.” The phone instantly is ringing, my secretary yells “Dickey on 40.” Oh no, head of sales at Morgan Stanley, smells blood. Think fast, AMDs new chip doesn’t cut it, Cyrix is late, no way will Intel miss the quarter. “Kiniry on 40.” That’s the trader. I pick up. “Kurlak’s whacking numbers, says pricing sucks, Intel will glitch, stock’s down 6 and a teenie, ha?” “It’s B.S., I’ll do a break-in.” “London on 42, Miller from SF on…” I sprint to the trading floor, think up three bullet points on the way, hit the floor, am crushed by a dozen salesman and traders and a few friends laughing. I grab the hoot and holler, blast my bullets, ending with “Back up the truck, Mabel, and load up on this stock” I make my way to the over-the-counter trading desk, Intel’s stock is now only down $2, I hear a lot of chatter as my call went out to investors and trading desks around the world. Intel’s now down an 1/8, now it’s up a buck. Crisis avoided, elapsed time, 3 minutes and 15 seconds. I make my lunch.
On Wall Street, in the five years since this scene, instant analysis is now the norm. It didn’t used to be that way. First the ticker tape and then phones and then quote machines interconnected traders and investors with information, rumors and lies, but the pace was glacial. News would come out, and analysts would have a day, or at least hours to figure out what was taking place and communicate their spin to clients.
Cheating time for fun and profit has a long history, the legend of Nathan Rothschild shorting the French market upon hearing almost a week ahead of time that Napoleon was defeated at Waterloo. Reuters got their start in 1849 by transmitting stock prices by carrier pigeon between Aachen and Brussels until the telegraph provided faster (and cleaner) transmission. Even Hollywood had Eddie Murphy stealing crop reports to get positioned right in orange juice futures in the movie Trading Places.
In the mid-‘80’s, fax machines existed, as did fed ex, but still the pace was still slow. I found that if I could cheat time, I could get information to clients first, who then might remember my spin and analysis, and by the time everyone else called them, it would be old news.
I used to tackle the FedEx guy when he came to my floor to get a package of monthly industry order numbers, but finally started hanging around the FedEx office in midtown at 9:30 AM and asking nicely if I could pick up my package myself. I scooped the street by an hour before everyone caught on and started using Compuserve to release the numbers the night before.
The next trick to cheat time was to chew up time for others. Before conference calls, companies would talk to analysts on a first-come, first-serve basis. On the appointed day, I would sit by my Quotron waiting to see Intel’s earnings release on the tape, and then speed dial to be the first call in, then chat for a good 45 minutes or so, knowing full well that others were stewing waiting for their calls to be returned. Meanwhile, I would pass a hand written note for someone to read over the open mike to salesmen and brokers. We had the first call indeed. Conference calls and detailed faxes ended that game after a few years.
Round the clock trading means that instant news anytime of the day and night is here to stay. I’ve had the strangest stuff blast at me: Lawsuits, jury verdicts, competitive product announcements, plant explosions, price cuts in Japan, other analysts making stuff up, earthquakes, I never knew what what was going to hit, but I needed a great response no matter what. More than once I awoke to my wife saying “there is a Yamamoto-san on the phone, who the hell is he?”
Email has your competitors getting news the same time you do, so the only way to have a lead is by creating Negative Time, by doing my homework in advance and anticipating news vs. reacting to it. Speed kills, unless you are prepared, understand all the possible scenarios. If you work hard enough, you can know tomorrow’s Wall Street Journal headlines today, or at least not be surprised by anything and be positioned to react.
Perhaps this sounds unique for Wall Street analysts or hedge fund investors, but I doubt it. The knowledge economy insists on speed, and instant analysis wins. The implications to all knowledge workers are clear, as technology and communications bring faster information on their business to an almost real time feed, the necessity for instant analysis becomes critical. Negative time will rule. Just figuring how to cope is an interesting exercise, figuring out how to excel will separate winners from losers.
