Thread on some of my favorite pieces from today's new post:

Technology & The Financial Printing Press

This thread will cover three main sections:

• The Printing Press

• Ticker Machines

• A 1930 Quant Fund


The honorable @wolfejosh said on his podcast with @patrick_oshag :

"If you want change and progress, somebody's got to look at something and literally go back to those two words and say, what sucks? That sucks.

And then you have to be motivated to want change it."

What I find interesting is that while technology usually solves this "what sucks" problem...

It can often produce new headaches itself, requiring further improvements and augmentations...

One great example: The Printing Press

It is impossible to overstate the impact of the Printing Press on society.

• Broader readership

• Empowered community led movements (Martin Luther's 95 theses & the Protestant Reformation)

• Ensured greater accuracy in industries like science where this was crucial

Obviously, however, the most notable impact was on the number of works published each year:

In *just* 1550 there were 3 million books produced across Western Europe; more than all the manuscripts published during the entire 14th century.

Yet, this technology led to a new problem similar to the one we have today:

Informational Abundance.

The explosion in printed works led to an onslaught of information that quickly became overwhelming.

• "Is there anywhere on Earth exempt from these swarms of new books?" - Erasmus (1525)

• "That horrible mass of books [..] keeps on growing.” - Gottfried Wilhelm Leibniz (1680)

• In 1581 a philosopher complained that no one could read every printed book in 10M years.

While the new technology was innovative and revolutionary, there were problems with the onslaught of information it produced.

The solution? Some familiar inventions to synthesize and distill info:

• First Book Reviews published

• Index Sections

• Table of Contents

Of course, this led to complaints by authors that felt there works were suddenly not being appreciated.

Some authors went so far as to not even include an Index as a means of forcing people to read their entire book.

This all brings us back to the world of financial markets with the introduction of ticker machines in 1867.

Ticker Machines = Financial Printing Presses

In 1903, Sereno Pratt stated the cornerstone of modern finance is “speed with accuracy [and] promptness in all things.”

Pratt's list of Wall Street's six most important tools reflects this:

We will focus on the ticker, however, the importance and growth of which is shown below:

"Ticker Impressions"

• 1890 - 7.2 Million

• 1901 - 12.8 Million

Like the printing press, the explosion in information and data required further innovations and new systems to analyze / synthesize the data so that people could leverage it for their advantage.

One of the ways this data was distilled lives on today: Stock Tickers:

This made it easier and faster to digest large quantities of information.

This image shows an early ticker tape reading:

Perhaps even more remarkable than the ticker, however, were the archaic systems in place *before* the ticker.

I present the "The High Frequency *Pigeon* Network"

Similar to the introduction of Book Reviews and Index sections following the Printing Press, Wall Street devised new systems to synthesize the vast quantities of data into actionable insights via two key developments:

• Market Slips

• Market Reports

For an investor, these services "saves him much of the trouble and time of analyzing reports and statements, and of interpreting movements."

(Pratt, 1903)

Most interesting, was the way that savvy investors utilized this sudden boom in data to develop and back-test new sophisticated strategies.

Karl Karsten, a statistician and investor in the 1920s / 30s managed perhaps one of the world's earliest quantitative hedge funds.

With so much data to study and test, Karsten set out to see if he could determine what important "factors" influenced future economic conditions relying solely on data and a systematic approach (read: factor investing).

I mean, just look how familiar his process sounds in relation to quantitative factor investors!

As fellow financial history geek @jasonzweigwsj pointed out, Karsten developed a Long/Short Momentum fund utilizing what Karsten called "the hedge principle" (aka hedge fund).

Satisfied with his back-tested strategy for predicting the market's movements, Karsten launched a fund in 1930. Jason described it as

"A small fund run with real money and nothing but math."

Returns in the admittedly short period were good:

Karsten: 78%

Dow: -21%

Karsten theorized that as computing power and analytics improved over time...

“[There is] no reason why a very large machine should not be made for the simultaneous calculation of a large number of predictions of different phases of business and financial conditions”

Karsten's prediction sounds a lot like a section of @OSAMResearch 's Performance Hub on Canvas...

Today we have more data than EVER. Technology has produced countless innovations, which requires more technology to synthesize and analyze this data for actionable intelligence.

OSAM's Custom Indexing Platform, Canvas, is one such critical tool.

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Jamie Catherwood

Jamie Catherwood Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @InvestorAmnesia

21 Feb
Financial History: Sunday Reads

• Electric Cars: 19th Century Tech

• Tech Revolutions: Bicycle Mania

• Startup Fraud & South Sea Bubble

• The Birth of Electric Cars

• The 17th Century Tech Bubble

[Repost - New posts next week!]…
I think this is my favorite Sunday Reads of the last 2+ years
And if you’ve missed them until now, I’ve put out two articles in the last two weeks with a third dropping tomorrow.

Read 4 tweets
22 Nov 20
Financial History: Sunday Reads

• An Exciting Announcement

• The Bubble Triangle

• The First Bubble: New Evidence

• Speculative Finance: Cycle Mania

• Fraud & Financial Scandals

• Another 20's Bubble?…
"Wall Street Bubbles; Always the Same"


Blows my mind when people 100+ years ago say stuff like this, and nothing has changed.
Little things like this illustration just really demonstrate how little human nature changes over the course of centuries.

For all the progress we've made as a society, 100+ years ago people stated "every bubble is the same", and it still holds true.

Read 5 tweets
10 Nov 20
Take the time to read this 1886 Economist piece. Trust me. (Seriously)

An all time favorite historical source I like to re-read.

Excellent insight into human nature via a description of the Guinness IPO in 1886, and investor mania.

This writing...

"It was doo delightful; it was betting on a certainty, or subscribing to a lottery in which all the tickets were prizes...

The world which desires money, quickly and easily made - and that world is the largest of all - was stirred to its foundations."
"Experience of one generation seldom teaches another... not one business-man in three in the City of London could write out an outline history of the last [mania].

Experience will not prevent speculative manias any more than it will prevent ambitious wars..."
Read 5 tweets
23 Aug 20
Financial History: Sunday Reads

• IPO Pricing: The Very Long Run

• Private Origins of Private Companies

• Why Go Public?

• Five Eras of Financial Markets

• Financial Innovation & Market Access

• Private Capital & Public Credit: Railways…
"Proportion held, in aggregate, by the Harvard, Princeton, and Yale endowments..."

(1900 - 2013)
Two awesome charts from some of today's papers:
Read 6 tweets
9 Aug 20
Financial History: Sunday Reads

• Electric Vehicles: A 19th Century Innovation

• Tech Revolutions: Bicycle Mania

• Sketchy Startups & The South Sea Bubble

• The Birth of Electric Cars

• The 17th Century Tech Bubble…
This made my week.

The Reddit post in the second picture is a *perfect* example of the speculative pattern I discuss in today's Sunday Reads...

And as a writer, there is nothing more satisfying than knowing your work resonated with someone.
Some "new" innovations that are actually a century old:

• Electric Taxi Cab Fleets in NYC (1897)

• Electric Trucks (1899)
Read 7 tweets
26 Jul 20
Financial History: Sunday Reads

• A Short History of Tontines

• The Allure of Public Markets

• SPACs in the South Sea Bubble?

• The Birth of Investment Trusts

• Financial Weapons of Mass Destruction…
Today's Sunday Reads covers the general history of financial contraptions, but specifically SPACs and Tontines.

I answer questions like why did Bill Ackman name his SPAC after a 17th century financial contraption described as:

"Part annuity, part mortality lottery"
Tontines are crucial to American history.

After signing the Buttonwood Agreement, the brokers needed a place to conduct business, and settled on a coffee shop.

A tontine financed construction of the "The Tontine Coffee House", which later evolved into the NYSE.
Read 4 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!