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Abstract
How
did companies at the Trade Center respond to the destruction
brought about by the attack on September 11th? In this paper
we look through the concrete and glass facade of the twin
towers into the socio-technical networks of people, machines,
and ideas that constituted the trading rooms. We follow the
traders of an investment bank adjacent to the Trade Center
in their escape away from Ground Zero to a makeshift trading
room in New Jersey. We accompany them in their efforts at
restoring trading operations, which revealed a socio-technical
network of relations, connections, bandwidth politics, and
time-critical data normally hidden from view. We support these
findings with interview materials from a focus group with
heads of technology of major Trade Center companies. Successful
recovery, we found, was a combination of planning and spontaneity,
of redundancy and self-organization, typical of firms with
non-bureaucratic and non-hierarchical forms. With these findings
in hand, we visit the debate on the redevelopment of Lower
Manhattan, and propose for the district at large the same
recipe that worked for the firms: rather than pursue top-down
detailed urban planning based on the world of finance that
we know today, we propose instead to emphasize lateral ties
and promote organizational diversity as a basis for innovation.
Introduction
So
accustomed have we grown to the image of the World Trade Center
as a facade, two tall rectangles cut against the skyline of
Manhattan, that we are usually unaware that it is only the
outsides of the buildings that are displayed to us. In the
countless media representations, rarely do we see inside the
towers. And although we see photographs of the victims of
the attack and learn about their personal lives, rarely do
we hear about the work that was done behind that curtain wall
of concrete and tinted glass.
Between
the restaurant at its pinnacle and the retail shops in its
basement mall, the Trade Center was above all a place of finance
- not retail banking, of course, but a type of financial activity
that involved trading. If, before September 11th, you were
to choose a floor at random for exploration, you would more
likely than not end up in a trading room, those vast open
spaces where traders, salesmen and analysts buy and sell stocks
and bonds. Cantor Fitzgerald, for example, the bond-trading
company that suffered most in the attack, was a trading room.
Morgan Stanley, the largest tenant of the towers with 23 floors,
had many trading rooms.
In
this paper we examine a trading room that was damaged in the
September 11th attack. The trading room, part of an international
investment bank, was located in the World Financial Center,
directly adjacent to the World Trade Center. Two years before
September 11th, we began ethnographic field research in the
trading room as part of a project to study how the social
organization of trading was changing in response to new information
technologies. What, we wondered, is the role of place under
conditions of global connectivity? Our findings, as the reader
shall see, are rich in paradox: the more that timely information
is available simultaneously to all market actors, the more
advantage shifts from economies of information to processes
of interpretation. The trading room, so abundant in information,
is a place of interpretation. Our findings about the social
organization of trading in the era of quantitative finance,
reported below, have implications for current debates about
the redevelopment of Lower Manhattan.
Since
September 11th, we continued our ethnographic research as
we followed the traders in their relocation to New Jersey.
Our findings there confirmed our preliminary insights that
traders place a high value on physical proximity to facilitate
the kinds of association that are so important for their work.
It also revealed that trading rests not only on social organization
but also within a complex set of technical relations. The
attack on September 11th damaged the trading room and completely
disrupted the technologies that are so fundamental to modern
trading. This disruption lays bare the socio-technical
character of these relations. The breakdown of technology
is society made visible.
In
addition to our direct observations in the relocated trading
room, we also report below on our conversations with senior
managers of other financial firms in the WTC complex. How
were firms able to respond so rapidly and effectively when
their operations had crumbled, quite literally and so devastatingly,
all around them? In passages from these conversations reported
below, our interlocutors give voice to the fear and loss they
experienced as they were working in those terrible days, and
they tell of how strong personal ties were keys in the recovery
process. As we shall see, organizational responsiveness rested
less on contingency plans and hierarchical command structures
than on heterarchical structures of self organization and
lateral coordination. In short, the kinds of distributed intelligence
that are so important in the day-to-day operation of the trading
rooms formed the basis of organizational response to crisis.
Our paper, thus, opens with a brief analysis of the social
organization of a trading room.
Modern
Finance, Place, and Technology
The
equities room of International Securities, like its counterparts
at the Trade Center, offers a sharp contrast from the conventional
environment of corporate America.1 Enter the World Financial
Center office complex. Take the elevator and go up one of
its towers. As you exit the elevator on the 20th floor, a
sea of desks with multi-colored Bloomberg screens opens up.
The desks are occupied by relaxed traders clad in business
casual wear. Unlike a standard corporate office with cubicles
and a layout meant to emphasize differences in hierarchical
status, trading rooms are open-plan surfaces where information
roams freely. Instead of housing its support staff in the
center of the floor, as corporations do, International Securities
sits its manager at the center, where everyone can reach him.
And instead of having its senior managers scattered on window
offices around the exterior of the building (where the chance
of bumping into them is minimized), the bank puts managers
in the same desk as their teams, accessible to them with just
a movement of the head or hand. Underscoring the importance
of trust and sociability, the bank has limited the number
of people in the room to 150 employees and has a low-monitor
policy so that people can see each other.
What
about the traders themselves, those privileged inhabitants
of the trading room? Their outlook and personality has been
radically altered by a silent technological revolution that
swept over Wall Street in the last two decades. This revolution
- the quantitative revolution in finance - was ignited by
the rise of derivatives such as futures and options, of mathematical
formulas such as Black-Scholes, of network connectivity to
electronic markets such as the NASDAQ, and by high-powered
computers. 2As a result, finance is nowadays mathematical,
networked, computational, and knowledge-intensive. (By January
2000, for example, the total notional amount of derivatives
contracts outstanding world-wide was $108 trillion, the equivalent
of nearly $18,000 for every human being on earth.) In this
context, traders have evolved with the industry. Whereas the
traders of the 1980s, acutely described by Tom Wolfe (1987)
as Masters of the Universe, were characterized by their riches,
bravado, and little regard for small investors, the quantitative
traders of nowadays have MBA degrees in finance, PhDs in physics
and statistics, and are more appropriately thought of as engineers.
None of them wears suspenders.
The
trading strategy of choice of quantitative traders is arbitrage
in its different blends and styles (for a detailed treatment
of valuation and arbitrage, see Beunza and Stark 2002).3
Arbitrage produces profits by associating previously disparate
markets and interpreting securities in multiple ways. For
example, arbitrageurs associate the markets for the stocks
of two merging companies when the merger makes their value
momentarily comparable. Or they associate the stocks of two
companies that are in the same index, and hence move similarly,
or a stock and a bond of the same company, whose value is
linked by a legal clause that makes the bond convertible into
stock. The point in every case is to avoid the conventional
route of valuing a company by its intrinsic value or by how
hot it is with market speculators, and to choose instead a
lens that produces an opportunity - a new, original
valuation that differs from the value that the market assigns
to a company. Thus, like a striking literary metaphor, an
arbitrage trade reaches out and associates the value of a
stock to some other, previously unidentified security. The
two securities used for arbitrage have to be similar enough
so as to hedge exposure, but different enough so that other
traders have not seen the resemblance and realized the opportunity
before. Each trade, then, is never exactly like the previous
one. While alternative trading strategies, such as value investing
or momentum trading, emphasize early access to information,
arbitrage draws on novel interpretation. And whereas value
trading is essentialist and momentum trading is extrinsic,
arbitrage is associational. 4
The
trading room of International Securities buzzes with a variety
of arbitrage styles. Each desk in the room corresponds to
a different strategy, such as merger arbitrage, index arbitrage,
or customer trading arbitrage. But the differences among desks
are more than just operational: different desks have different
principles of value, and the intimacy and repeated contact
that they create leads to different social worlds. Traders
at the merger arbitrage desk, for example, value companies
that are being acquired in terms of the stock price of the
company that is acquiring them. They specialize in asking
themselves, "what is the probability that company X and
Y might merge?" Analytical and calculating, for them
companies are little more than potential acquirers and acquisition
targets. By contrast, traders at the convertible bond arbitrage
desk exploit the value of "convertibility provisions"
embedded in some bonds that give the bondholder the option
to convert his or her bond into stocks. To do so, they look
at stocks as bonds, and focus on information about listed
companies that would normally only interest bondholders. Traders
at the customer sales desk, to use another example, take and
give buy and sell orders to customers. Sociable and gregarious,
they trade, talk on the phone and pass around Beef Jerky.
The sound of their voices on the phone gives the rest of the
room a window on the anxiety level of the traders' customers
and the sentiment of the market at large.
The
associations established by the arbitrageurs are shaped by
patterns of association in the room. Each arbitrage strategy
associates securities that share a common property that makes
their value comparable such as convertibility, volatility,
participation in a merger, liquidity, or optionability. Since,
as noted above, each desk in the room corresponds to a different
strategy, interaction across desks helps traders deconstruct
the value of a stock or property into its constituent aspects,
or properties. A merger arbitrage trade, for example, associates
two stocks that share one property - a high probability of
merger - but may be affected by a different property of the
stock such as high volatility, a convertibility provision,
lack of liquidity, or pressure from an index. Physical closeness
to other desks helps merger arbitrageurs isolate the property
of interest from unwanted ones; for example, overhearing nearby
traders at the convertible bond arbitrage desk may make them
aware of details of those provisions. In turn, traders at
the convertible bond arbitrage desk may benefit from overhearing
details about the volatility of a stock from traders at the
nearby options arbitrage desk.
Co-location
also allows traders to synthesize the strategies performed
by different desks into original, innovative trades. At International
Securities, for example, a desk called "special situations"
recently designed a novel "election trade" by imagining
themselves being merger arbitrageurs in a case that involved
a stock swap. Looking at a swap as if it were a merger gave
them a distinctive perspective, the best source of profits
in an industry charaterized by electronic markets and instant
diffusion of information. The traders could do so because
of their closeness to the merger desk. A trader is not an
isolated and contemplative thinker, but engaged in cognition
that is socially distributed across persons and things.5
Thus,
in trying to understand the modus operandi of the trading
room we came to see that its locus operandi was crucially
important. The more we observed, the more we could not ignore
claims that electronic trading would eliminate the importance
of physical location. We found that the more that trading
becomes virtual, the more it heightens the salience of physical
proximity -- at least at the elite level. The reason for this
is that the more information is simultaneously available to
nearly every market actor, the more strategic advantage shift
from economies of information to socio-cognitive
processes of interpretation (Brown and Duguid, 20001a,
2001b, 2000a and 2000b, 1998). This particular trading room
makes profits - considerably higher than industry-average
profits - not by access to better or more timely information,
but by producing communities of interpretation.
In
addition to distributed cognition through co-location, technology
is another key source of competitive advantage. International
Securities, for example, invests massively in Bloomberg terminals
that allow traders to represent financial value in a thousand
different ways such as spread plots, bond valuation models,
or active spreadsheet links. High-bandwidth connections to
the market give traders a crucial temporal edge over retail
investors by providing them with price data almost in real-time.
A computer platform (called the "trading engine")
automates all the clerical operations related to trading such
as registering trades, breaking them into small pieces to
avoid detection by rivals, etc. And numerous traders use computer
systems (called "trading robots") to automate the
buy-and-sell process according to a logic codified in an algorithm.
However,
mindless engineering alone does not give International Securities
its edge over rivals. The key lies in an interaction between
technology and humans and ideas, a socio-technical network
constituted by all these three elements (Latour 1991; Callon
1998). Trading robots are a good example of that interaction.
A robot is system made up of connections, algorithms, and
computer hardware that receives market data and sends trading
orders according to some theoretical principle of finance
such as "mean reversion." But there is a lot that
is social among those cables, chips, and lines of code. In
the development of the robot, for example, the algorithm is
programmed collaboratively by computer programers and traders
in a special meeting room designed for rapid informal collaboration
("the whiteboard"). The robot is monitored by a
human trader, a so-called statistical arbitrage trader, whose
job is to stop the algorithm whenever the market situation
is no longer consistent with the theory that inspired the
code. For example, when two companies merge, the principle
of mean reversion no longer applies and the robot, if not
turned off, would perform money-losing trades. To supervise
the robot, the statistical arbitrage trader makes use of humans
in the rest of the room. For example, the trader obtains crucial
hints about which companies are about to merge by overhearing
conversations at the nearby merger arbitrage desk. Similarly,
the human monitor of the robot uses the room to find out whether
the data arriving to the robot is delayed (and therefore a
dangerous misrepresentation of real prices). This is done
by paying careful attention to expletives or panic among the
computer technicians that sit close by instead of relying
exclusively on the dials and speedometers built into the robot.
If the statistical arbitrageur hears expletives, it means
that there are technical problems, even if the computer dials
say "fine."
The
trading room of International Securities, as much as those
trading rooms at the Trade Center that disappeared with the
attack, assembled together an original set of social, spatial,
and technical elements that need to be understood to appreciate
what "finance" meant in Lower Manhattan. In this
elite world of finance, social relations matter: the interpretive
process that took place in it drew on non-hierarchical social
relationships, trust, and lateral ties. Space also mattered:
the room and its desk-based spatial configuration promoted
communication and distributed cognition across teams. And
technology mattered too. The room relied on highly automated
trading technologies such as trading robots and trading engines,
and these technologies took advantage of the constant communication
across traders afforded by the co-location in space.
A
Desk on the 20th Floor
On
September 11th, a deafening explosion interrupted the work
of the arbitrageurs at International Securities. As they rushed
to the windows on the east side of their trading room they
saw the adjacent building, the Trade Center, go up in flames
as the first terrorist plane hit Tower One. The second plane
crash brought terror and a tumultuous escape to the Hudson
River. By the time the towers fell, the traders were already
on the ferry to New Jersey. Fortunately, none of the employees
at International Securities was harmed. The building, however,
was badly damaged, making the trading room dangerous and inaccessible.
The Trade Center had collapsed at its doorstep. Its windows
were shattered with the explosion and pierced by debris from
the fallen towers. Dust, ash and dirt, possibly containing
asbestos and toxic chemicals, entered the room and penetrated
the computers, clogging their fans, overheating them and rendering
them unusable and unsafe for repair. The data they contained
was lost. The building was deemed structurally unsafe, and
access to it was prohibited for months. As a result, the lively
trading room that had once supported the innovative work of
interpretation became a dark hole with no electricity, no
connectivity and no assurance of safety from toxic chemicals.
On
the night of Sept 11th the management team of the equities
trading room at International Securities regrouped in New
Jersey and estimated that it would take them from three weeks
to three months to be trading again. The bank had only one
equities trading room in the US and there was no backup site
to which they could go. The bank did have another available
facility, a back-office in a suburb of New Jersey, but the
only resource that the traders could count on was spare space
in a basement where the firm stored corporate-style minicomputers
for processing payroll data. The basement had no computers,
no desks and no connectivity.
Yet,
six days later, as soon as the New York Exchange re-opened
on September 17th, the traders at International Securities
were trading again. We were privileged to witness how this
was accomplished. Several days after the attack, we sent an
email of concern to ask if everyone had escaped unharmed.
To our relief, we learned that no one was injured. To our
surprise, the return email included an invitation, indeed,
an insistence, that we come over to New Jersey to witness
the recovery process. "It is chaotic," wrote the
manager of the trading room, "but also very inspiring."
Our presence would be "a reminder of normal times."
As ethnographers, we felt enormously honored to be welcomed
to document these extraordinary efforts.
Thus,
on September 19th we were back among traders in our role as
observers, this time in an improvised trading room in a converted
basement warehouse of New Jersey. The temporary trading room
was barely an hour's drive away from Manhattan, but it felt
a universe away from the excitement and activity of Wall Street.
Located in a suburban corporate park, the building was surrounded
by similar low-rise corporate offices, used by manufacturing
companies such as Colgate or AT&T. Just around the corner,
a farm announced "Hay For Sale." The surroundings
offered an endless succession of down-market shopping malls,
Wal-Marts and Dunkin Donuts; one could drive around for an
hour and never be able to find espresso coffee. What had been
the back office of International Securities had, in effect,
become its front office too. Our traders were Wall Street
traders... in New Jersey.
The
trading room was located in the basement of the building.
To reach it we had to pass several rows of corporate-style
cubicles and beige carpet; after the cubicles, we reached
the trading room - perhaps the most unexpected sight in such
an environment. A huge open-plan space, complete with traders,
desks, computers, outsized TV screens, and multi-time zone
clocks. The room had a makeshift feel to it: no windows, a
low ceiling and walls painted in industrial yellow, more fitting
for a storage room than a trading room. Indeed, one week before
our visit the place was still being used to store the mainframes
and tape machines used by the bank's data center. The floor-level
air-conditioning ducts used to cool the machines were still
working on September 19th, chilling our legs from the shoes
up. Inside the room, workers in the technology department
constantly moved up and down among spare cables, keyboards,
and mouses interspersed with empty cans of diet Pepsi and
Mug root beer.
Our
traders were not just makeshift arbitrageurs - they were survivors.
"I don't have to tell you how close we were," one
of them told us. "You've been there. You know it."
A huge American flag hung in the middle of a wall, and dozens
of small ones colored the top of many traders' screens like
flowers in a green field. Of the three home cinema-sized TVs
(typically used in the Financial Center trading room to get
market news), one was switched from CNBC to CNN for news of
the impending war in Afghanistan. The dress code had shifted
from business casual to jeans and boots. The room was noisy,
but the sound, as one trader put it, was "a wonderful
sound of life."
Our
traders were in New Jersey, unquestionably in a basement storage
room in New Jersey. But a sign taped prominently on the wall
gave different bearings: "20th Floor, Equities."
In other parts of the same enormous room one could read other
signs: "21st Floor, Fixed Income" and "19th
Floor, Risk Management." Our traders were still between
the 19th and the 21st floors, but now horizontally rather
than vertically. Moreover, within the constraints of those
temporary quarters, they had arranged their desks to replicate
the layout of the Financial Center trading room. For example,
every trader in the "agency trading" desk remained
together, sitting on the same desk. In the Financial Center
trading room they sat on a spacious desk between the "stock-loan"
and the "special situations" desk. In New Jersey,
they camped on a table partly occupied by two photocopiers
and three fax machines, in what used to be the fax station
of the data center. But they stayed together. The desks also
preserved their relative locations, reconstructing the cognitive
order of the trading room at the Financial Center. When the
managers of the agency and special situations desks found
themselves sitting again in front of each other, they reverted
to their old routine of checking perceptions against each
other, probing into each other's beliefs, and designing together
new arbitrage trades. At some point, one of them exclaimed
in exhaustion, "Everybody seems to be thinking with my
brain today!" a reflection that the distributed cognition
afforded by the desk pattern was again taking place.
The traders could replicate the floorplan of the Financial
Center trading room, but not the technology. Direct data from
the New York Stock Exchange was not available. "Trade
Manager v1.4a," the platform of hardware and software
that registered and processed trades (also called the "trading
engine"), was not working. The customary phone turrets
with twenty lines each were also not available, and the traders
had to make do with off-the-rack single-line phones (which
they slammed with the usual energy). Instead of Sun workstations,
they were working on Pentium IIs and laptops, some brought
from the traders' homes, some rescued from the data center,
some hurriedly purchased in the days following the attack.
Instead of having virtually unlimited bandwidth they now had
to adapt to limited network connections that did not allow
all desks in the room to trade simultaneously.
The
trader's response to September 11th contains important insights
for a socio-technical view of organizations. In the sections
above we have argued that arbitrageurs associate stocks by
associating people, artifacts, and ideas in the same place.
Conceptually, it is tempting to split this socio-technical
network into humans and machines - people who think and talk
vs. machines that obey pre-programmed commands. But such separation
is misconceived. "Technology," writes Bruno Latour
(1991, p. 1), "is society made durable." Yet, what
happens when technology breaks down, when traders who were
accustomed to twenty dedicated phone lines apiece must share
phones, when traders whose style of trading is based on speed
and volume must suddenly operate with minimal bandwidth? The
breakdown of the trading technology at International Securities
opened up for us a window on its socio-technical network -
a network that operated seamlessly and invisibly in the Financial
Center trading room. The breakdown of technology is society
made visible.
The
breakdown of technology revealed the ways in which people
and artifacts are inextricably linked. For example, in describing
the process whereby the bank established a connection to the
NYSE, we noted that the head of technology at International
Securities used "connection" and "relationship"
interchangeably. On some occasions he would refer to "Mike,"
and on some others to "the ISDN connection," yet
mean the same thing. The first attempt to connect was through
electronic communication networks (ECNs) but the connection
kept dropping every minute, which proved very problematic
for the traders because they could not know their exposure.
In the end, the bank only managed to connect to the NYSE through
an ECN that brought their technicians to the trading room.
And, in turn, the only reason the ECN invested its resources
(technician, etc.) in this manner was that it had an on-going
relationship with International Securities and was interested
in having the bank trading through its system and providing
volume and liquidity. Hence the tight link between social
and technical ties: as the head of technology explained, "Once
we establish a relationship with someone, it's very easy to
move on" to a connection. Companies with wide social
networks, this implies, should recover more easily from problems
with their technology.
As
society made durable, the technology of International Securities
also reflected the regulatory environment in which it was
developed. In the process of re-connecting the New Jersey
trading room to the NYSE, our traders experienced great difficulty
in finding appropriate modems for their machines. The reason,
it turned out, was that in the past regulatory requirements
limited banks to slow 9.6 K baud rate connections to the NYSE
in order to prevent speed races. Technology is also regulation
made durable. Without modems specially configured in that
manner, the traders in New Jersey were not be able to send
and receive data to and from the NYSE. But by September 2001,
modems old enough to crawl at 9.6 K baud could not be obtained
through commercial channels. In order to be able to trade,
the head of technology explained to us, he tried to rescue
them from the Financial Center:
The
modems were in the old Unix computers, and we could not find
new modems for our computers. So I had to go back to World
Financial Center to strip the computers, walking up twenty
floors in a chemical suit and with a torch light, as there
was no electricity.
A
socio-technical network is far more complex than the simple
sum of the social and technical ties in the organization.
The severance of technical ties, for example, cannot automatically
be fixed by new social ones. This became clear in the sign
"20th Floor, Equities" placed on the wall, and its
insistence in reproducing the old floor structure embodied
in it. The sign not only reminded traders that the equities
trading room was between risk management and fixed income,
but it also led employees back to their jobs as traders: by
reconfiguring the socio-technical network that had disappeared,
it reduced the fundamental uncertainty that the traders faced.
According to Callon, a socio-technical network
is
not connecting identities which are already there, but a network
that configures ontologies. The agents, their dimensions and
what they are and do, all depend on the morphology of the
relations in which they are involved (Callon, 1998, p. 15).
After
the attack, traders were left wondering whether their firm
would continue to exist, whether the trading room would operate
again, what they should do, and even what they were. The basement
turned those survivors back into traders. To the question
of, "who am I?" the computers, desks, and open-plan
spaced answered "a trader." To the question of,
"what should I do?" the "20th floor" sign
answered: the same as in the Financial Center trading room.
The
ontological character of the socio-technical network was also
manifest in the discourse of the company's traders. We found
them engaged in a seemingly philosophical debate about the
meaning of "real data." The problem that they faced
was that the proprietary direct data connections that linked
International Securities with the NYSE ran directly to the
Financial Center, and therefore could not be used in New Jersey.
The traders had to rely instead on data from Bloomberg L.P.
But, the traders complained, "Bloomberg data is not real
data." It had small, unannounced delays, which made it
unsuitable for some trading strategies such as index arbitrage.
If data cannot be made part of the network, the traders seemed
to be arguing, it does not even count as real. The network,
as Callon argues, configures the ontology of the actants.
The
socio-technical network of people, machines and ideas at the
Financial Center was restored, but not in its pristine form.
Whereas the elements that remained turned the survivors back
into traders, those that changed redefined for many the meaning
of "trader." In the agency trading desk, for example,
the destruction of the trading engine turned junior traders
into clerks. The operations that were previously automated
by the engine such as booking trades, registering them, breaking
them up, etc., had to be done manually, effectively taking
the bank to the trading technology that it used five years
before. Junior traders stood up behind those lucky senior
traders who had a seat and a computer, ready to help. When,
in the middle of a phone conversation, one such trader suddenly
needed to record a transaction, at the shout of "gimme
a ticket, somebody gimme a ticket!" three junior traders
scrambled to offer tickets, paper and whatever else he might
need. Another junior was told to "help with the tickets"
and "relieve others" - but told with a sensitivity
to the situation characteristic of International Securities:
following the indications, the senior trader who gave them
added "Oh, and this isn't permanent, by the way."
So unusual was manual bookkeeping for junior traders - so
radical the reconfiguration of the socio-technical network
that it required - that some of them did not even know how
to do it. "Can we do manual baskets?" a young trader
asked a more senior one. "Of course you can!" went
the answer.
The
lack of direct data from the NYSE transformed the traders
in the statistical arbitrage desk from monitor of the trading
robots into active participants in the price mechanism. "Welcome
to cut and paste land," one stat arb said to us by way
of greeting as we approached his makeshift desk in New Jersey.
By "cut and paste" he referred dismissively to the
operation he was constantly performing, transporting orders
from the e-mail system to the trading engine by force of pointing
and clicking his mouse. He labored in this fashion because
the lack of price feed in the Unix system forced him to connect
one interface to the other. As a result, he said, "I
have very little time left to do anything else" such
as monitoring the market and the speed of the price feeds,
his typical jobs. The breakdown of technology had transformed
these stat arbs from monitors of the trading robots into manual
operators.
Whereas
technical ties can make social ties more durable, breaks in
technical connectivity also create strains in social ties.
At International Securities, insufficient connectivity gave
rise to bandwidth politics. This was exacerbated by the limited
speed of the "stop-gap" machines the traders had,
off the rack PCs instead of specialized Sun workstations.
As a consequence, for eight weeks the bank traded only one
third of its regular volume before September 11th. Furthermore,
the reduction in volume was not the same across the board;
the customer trading desk, for example, rapidly went almost
back to its normal level of volume, but the (bandwidth sensitive)
index arbitrage desk remained extremely hampered. These problems
led to conflicts between statistical arbitrage and index arbitrage
traders over who could connect, and ultimately over the profitability
of their respective "books."
High
Touch, Low Tech
Following
our observations at International Securities, we felt that
we had to gain a better understanding of how socio-technical
networks that had taken an enormous blow and been badly damaged
could be, if not healed, at least restored. We began to talk
to numerous Trade Center firms that were directly affected
by the attack about response and recovery. We made extra efforts
to speak with the people responsible for technology and people
responsible for contingency planning, preparedness and continuity
management. We spoke with managers in large companies as well
as in small- and medium-sized firms. As part of this effort,
Columbia's Center on Organizational Innovation, joint with
Columbia's Interactive Design Lab, held a roundtable discussion
on December 5th with senior information technology and communications
executives from key Trade Center firms as well as major consulting
and technology firms. The companies included Merrill Lynch,
Cantor Fitzgerald, Deustche Bank, Sun Microsystems, Guy Carpenter,
Accenture and Fred Alger Associates. We told them we would
only report here their comments, without attributing them
to specific persons or companies. 6
What
did they tell us? No one said, "David, technology saved
us." Or, "Daniel, our plan really worked."
Despite being technology officers, they all pointed to the
human element in organizations. Of course, they did talk about
contingency plans and about technology. They told us, for
example, that it mattered that the Trade Center had been bombed
once before in 1993 and that their planning and preparation
subsequently made a difference, or that extra back-ups in
preparation for Y2K had proven for them to be really important
in recovery. But sound planning was not sufficient in dealing
with the uncertainties created by such a disaster. According
to three executives,
Well,
yes, we could not have done without the corporate technologies
that we had in place. But what surprised us, in the initial
hours and days after the attack, was how important were the
technologies that the company hadn't invested in.
A
business plan is one thing but you need a people plan, and
everybody needs a responsibility.
Without
that human element of commitment to the task, commitment to
each other, preparedness wouldn't have done anything. The
best plan would have never opened up.
Our
analytic findings are straightforward. Recovery was a combination
of planning and spontaneity, of redundancy and
self-organization. To give texture - organizational and human
texture - to these abstractions, we present some accounts
of recovery in the words of our informants. The first, appropriately,
is a story about stories from an executive at a major bond
trading firm in the Trade Center that suffered terrible casualties.
On the evening of Sept 11th, the survivors of the leadership
group met, knowing that they had to be trading when the bond
markets opened in the same week. The firm had followed all
the guidelines for contingency planning. They had backed up
their data - at not just one but, in fact, two off-site locations,
one across the river, one across the Atlantic. But they could
not access the system. As the executive recounts:
We
had 47 hours to get [ready for] September 13th, when the bond
markets reopened and there was one situation that our technology
department had that they spent more time on than anything
else… It was getting into the systems, [figuring out] the
IDs of the systems because so many people had died and the
people that knew how to get into those systems and who knew
the backup… and the second emergency guy were all gone. How
did they get into those systems? They sat around the group,
they [technology officers] talked about where they went on
vacation, what their kids' names were, what their wives' names
were, what their dogs' names were, you know, every imaginable
thing about their personal life. And the fact that we knew
things about their personal life to break into those IDs and
into the systems to be able to get the technology up and running
before the bond market opened, I think [that] is probably
the number one connection between technology, communication,
and people.
For
this organization, as for many after September 11th, it was
personal knowledge that made the difference. The organizational
forms that responded well were those in which employees shared
non-professional knowledge - not knowledge about careers or
accomplishments, but the kind of knowledge that could only
come about by close contact in relationships of trust. Without
this knowledge, as we saw in the case of the system passwords,
you had no technology and you had no information. 7
This, in turn, reveals the organizational form that supports
such knowledge. Employees knew the names of their colleagues'
spouses, or where they went on vacation, or their favorite
movies or music - but not because the organization had formally
inquired and entered this information into some central database.
The key in this case was how well they knew each other personally
- details of private life that are, in the strict sense, irrelevant
to their status as co-workers. With so much attention on how
to create resilient, self-healing technological networks,
here was compelling testimony to the resilience and self-healing
capacity of social networks. We heard similar things from
many representatives of directly affected firms - about the
importance during crisis of personal commitment, feeling like
a family, individual empowerment, and "lateral teams."
The
importance of the human side of socio-technical networks in
crises was echoed in many companies. "Without that human
element of commitment to task, commitment to each other,"
one executive noted, "preparedness wouldn't have done
anything. The best plan never would have been opened up."
This is illustrated in detail in the following quotation,
from the head of communications of an investment bank:
You
realized that the buildings had gone down. There's a moment
where you really do believe that you are the only person left
in this company alive and right from the beginning I think
it was more instinctual than it was ever organizational. Within
an hour and a half after the first plane hit, the four remaining
members of my team (I had ten at the Trade Center) were at
my front door. They had come from downtown, from wherever
they were, whether it was in a subway on the platform, in
the concourse, and they showed up at my door for no reason
other than we had to do something.
What
to do? Just as the traders at International Securities reverted
to trading, these engineers reverted to communications:
We
had to do what we knew how to do, which was communicate, and
I think that's the core of this whole tragedy is that the
people in this sort of environment, you always go back to
what you know best, and we were a communications team... within
three hours we had a call center set up.
Personal
contact was critical to recovery because firms, it is important
to recall, were managing people who were in fear and grief.
In these circumstances, "what made the difference, for
every company that came back successfully, one executive observed,
"[was] that kind of touch, high-touch, low-tech solution."
The following illustrates the dramatic context in which such
a solution is required:
This
was not a fire in a building which just destroyed 2 floors...
Most everybody lost people they knew. They were traumatized,
there was fear of war. Nobody knew if the next day there was
going to be more. I had a guy walking around with a picture
of his wife and kids in his pocket and he was looking at it
every two minutes because he was afraid he was never going
to get home again.
The
need for high-touch, low-tech was shown in the case of a company
that found itself relying too much on the efficiency of a
website, to the detriment of personal communication:
With
regard to the family and the emergency communications, we
really relied on a crisis communications website that we launched
on September 12. It began really as a list of safe and accounted-for
people with call center phone numbers to check with us, contact
information, and then sadly and quickly became a place to
distribute memorial service information, benefits information,
aid for the families and friends of the victims.
The
company was at first forced to rely on the website by the
circumstances of the attack. As the executive painfully recalled:
Without
an HR department - which we lost our entire HR department
- (...) the website became our only ongoing method of communications
and as such was so important to us. In terms of design and
interactivity we kept it deliberately simple.
But
the company eventually realized it had relied on the website
too much:
One
thing that I do want to say though is that in hindsight, that
we over-relied on that website because I think the most important
and crucial part of the tragedy is not to forget the benefits
of face-to-face communication. You could have told these people
go to the website a million times and we had so much information
on the the website... [But] you're grieving, you're not going
to read the information on the web site, and you know we could
have posted stuff there every second and it wouldn't have
mattered.
The
importance of social ties and personal knowledge was also
manifested, in the first days after the attack, in the problem
of locating people. Personal knowledge was key because corporate
means of communication had broken down. In the first moments
after the attack when the phone lines were swamped, survivors
would try to locate the others by e-mail sometimes, as our
informants narrated from Internet cafes somewhere in Manhattan.
But frequently corporate email was not working. In this context,
do you know your colleague's personal email account, for example,
an AOL or Yahoo account? When you obviously could not reach
someone at their office phone, do you know the home phone?
If not, do you have the beeper, pager, Blackberry, Palm PINs?
None of these? Do you know how to get to the home of your
supervisor?
Similarly,
porous organizational boundaries that led to strong social
ties with clients, vendors, and consultants also proved crucial.
According to another Trade Center executive,
Vendors
and suppliers in our information technology areas, in communications
and almost across the board really were absolutely outstanding.
It's very easy to criticize these people routinely. They're
the brunt of bad jokes. It's sort of corporate yucks to go
around and make fun of the infrastructure and who supplies
it. But in this case it was exceedingly generous. I can't
begin to tell how much we could count on the relationships
we had with vendors, consultants, and clients. People were
willing to do whatever they had to do to reconnect to us and
whether that meant working around the clock so that we could
be open on the 14th, they were there. You know, those relationships
can never be replaced with anything.
We
see the response to the crisis as an instance of innovation,
as a deviation from established routines. What mattered were
lateral ties that criss-crossed the vertical ties of corporate
hierarchy and self-organization of the teams. The tragedy
underscores the adaptive advantages, under conditions of uncertainty,
of non-bureaucratic organizations. Non-hierarchical organizations,
or "heterarchies" (Stark 1999; Girard and Stark
2002; Grabher 2002), are characterized by relationships of
interdependence, by lateral and distributed authority, and
an internal diversity of organizational forms. Like the trading
room of International Securities of the previous section,
heterarchical networks exhibit qualities of emergent self-organization,
strong lateral ties, and a diverse distribution of knowledge
and empowerment at lower levels of the organization.
The
importance of heterarchical organization is relevant in the
light of the ongoing discussion over the importance of "preparedness"
against disasters. As one executive said,
The
most forward-thinking and strategic of the things that we
have learned is that it's now our view that going forward
companies are going to be valued on something that I would
call preparedness. I think that that is going to become an
integral part of how investors, employees, fiduciaries, everybody,
counterparties, everyone looks at a companies' worthiness.
It will become analogous and perhaps even part of your credit
rating, and these preparedness issues come down to some of
the most mundane things... like mail processing, air travel,
workplace security, data security, and data infrastructure,
personal identification and personal accountability, and then
even things like new accounts and sources of funding.
The
traditional view on preparedness is based on contingency planning
and what we call replicative redundancy, that is, having
more than one of each thing in case the artifact in use breaks
down - more than one phone line, one computer system, one
trading room, etc. (Kelly and Stark, 2002). These are important;
for example, having a redundant trading room, as some investment
banks did as a result of contingency plans following the 1993
Trade Center attack, became key to guarantee continuity of
business operations. But we would like to question the traditional
view that there is a trade-off between preparedness and competitiveness,
or that the need for preparedness will give an advantage to
companies that are larger and more bureaucratic. The pressure
to have redundant systems and facilities betrays an almost-exclusive
attention to creating resilient, self-healing technologies
that overlooks the human side of socio-technical nature of
the networks. Worse, it does not take into account the resilience
and self-healing capacity of the human ties in these networks,
as manifested in the compelling testimonies of the Trade Center
companies above. The commitment to the team, imaginative use
of new technologies and creative responses exhibited by the
companies show a different, generative redundancy that allows
ties across socio-technical networks to be regenerated in
a broader set of circumstances than those envisioned in a
narrow recovery plan. As one executive put it,
I'll
stress that leaders lead in times of crisis. We had some excellent
examples of very focused decision making. People from all
parts of the organization really did think outside of the
box. By ensuring people had the right focus, we were able
to achieve some sort of miracle. We weren't able to do this
in our traditional modes of thinking and the last thing I
think I guess I really wanted to stress is that if you empower
people to think outside the box, you give them the authority
to solve a problem, they will solve it. I can't stress that
enough. We came up with this whole new sort of terminology
of crisis achievement. You know what we did in those first
two weeks was absolutely outstanding. I just wish we could
repeat it going forward.
If
the factors that explain a successful response are similar
to those that explain innovativeness, perhaps the metrics
that explain preparedness could look very similar to the metrics
for innovation.
Dispersion
In
April 2002, the traders from International Securities returned
to the World Financial Center. Other companies such as Merrill
Lynch, Commerzebank and American Express have also returned,
contributing to the future of Lower Manhattan as a business
district. But not all are returning. Officials at the city
and state levels have put together a program of economic incentives
such as cash grants and tax breaks to keep companies in Lower
Manhattan, but already an exodus seems to be in place, with
companies such as Lehman Brothers, Aon, Pillsbury Winthrop,
Dresdner Kleinwort Wasserstein, and ABN Amro leaving the area
to more expensive locations in Midtown, or more distant offices
in Brooklyn and Jersey City.8
What
about the companies at the Trade Center? The one approach
to preparedness on which Trade Center executives at the Roundtable
most clearly coincided was the need to disperse operations
geographically. "Are we going to have a single operation,
a single site in New York City?" asked one executive.
"The answer clearly is no, we're not going to…"
was his reply. Another executive explicitly linked preparedness
and dispersion:
So
when I think about measuring preparedness, one of the things
that… I heard loud and clear this morning again is an organization's
ability to operate geographically dispersed, effectively,
and those are two very distinct concepts that have to mutually
exist.
Our
Trade Center executives believe in dispersion for different
reasons. The obvious reason is to spread important operations
in different places, as one executive suggests:
Number
one, we have decidedly rethought our strategy of having all
mission-critical applications and functions, whether they
be electronic or human, in one location, and that just is
not restricted to buildings but geography.
But
other companies discovered that dispersion brings in additional
advantages, such as increased adaptiveness:
We
have a number of organizations within our agency. The organizations
that had a culture of dispersed employees, dispersed human
capital if you will, functioned a lot better during the emergency
than those that were traditionally organized along the office
structure.
For
two other executives the culture of dispersion is not just
an advantage, but a challenge of corporate change:
There's
a lot of managers who are not yet in line with the idea of
having a group, a team, your partner or whatever you want
to call the organizational unit that's in six different locations.
How
do you disperse intellectual capital [and] …have a management
team that can deal with the realities of trying to work in
that environment and still be as productive? I think that's
a key issue.
In
addition to a culture that promotes change, our executives
were also interested in the technological transformation that
dispersion will demand. According to one executive, "the
push now [is] for video collaborative interactive tool sets.
To be able to really take the model and decentralize it is
a very big push for us."
Trade
Center, Trading Rooms
Given
these trends in corporate dispersion, Lower Manhattan cannot
count on getting back the full complement of companies that
filled its Trade Center before the terrorist attack. For several
decades the district had already been losing a competition
against Midtown Manhattan as the location of choice for financial
companies, and forced relocation has accelerated that trend.
The debate about the redevelopment of the World Trade Center
site must consider these historic trends as well as take into
account the rise of electronic trading, a force that, according
to some, removes the needs for a district in finance. Our
research on trading prior to September 11th and on the dynamics
of recovery afterwards bears directly on this debate.
During
the last decades of the 20th Century, Wall Street has gone
through a veritable quantitative revolution based on three
legs: high-speed network connectivity, high-powered computation,
and the development of mathematical finance. Along important
dimensions, quantitative finance reduces the salience of physical
proximity. The NASDAQ, for example, has long operated as a
virtual market. As an electronic exchange, it is far from
an isolated example since the inexorable trend in cities around
the globe is from physical to electronic exchanges.9
Many of the largest hedge funds are located in Connecticutt,
and the largest mutual funds such as Fidelity, Janus or Vanguard
are as distant from Lower Manhattan as their respective locations,
Boston, Denver and Philadelphia.10 According to
The Economist,
Lower
Manhattan… may be the world's largest single electronic marketplace.
In the days when bank's vaults were full of bearer bonds and
stock certificates transferred by "runners" after
trades were done, trading firms had good reason to cluster
together. Yet proximity is little or no help in implementing
trades.11
But
some aspects of quantitative finance heighten the salience
of proximity. As electronic markets make hard information
instantly available to everyone, knowledge in soft or more
tacit forms of interpretations, impressions, and perceptions
of others become the key source of competitive advantage.
As we saw at International Securities, proximity of traders
to each other in the room was key in creating the interaction
across desks that lead to the most original and profitable
trades. And the deliberate way in which they attempted to
reconstruct the layout of the trading room in New Jersey revealed
how acutely they were aware of these dynamics. Similarly,
proximity to other financial firms was crucial for some arbitrage
strategies such as merger and convertible bond arbitrage.
In the case of merger arbitrage, for example, traders bet
on the likelihood of a merger. As part of their strategy,
they must determine the commitment of two firms to merge,
and to do so they find it crucial to attend companies' presentations.
As the traders told us, it's not enough just to hear the meeting
webcast on the Internet - one needs to be there, to see the
faces in the audience or around the table as firms make their
bold claims, to bump into ex-colleagues in the corridors,
and to have lunch with the people involved. To do so, it is
important to be close to other financial firms. In itself,
however, this does not imply being in Lower Manhattan: if
enough firms leave the district for, say, Midtown, then after
a while it will be in every firm's incentive to follow suit.
While
following discussions about the future of finance, it is clear
that many academics, policy-makers, and even people in business
identify Wall Street with the New York Stock Exchange (NYSE).
This identification would have been correct for most of the
20th Century: trading rooms began as extensions of the NYSE
that investment banks built inside their corporate skyscrapers
in order to carve out and better process the information they
obtained from it. Nowadays, however, equating Wall Street
with the NYSE amounts to the same superficial approach that
equates the Trade Center with its facade and never goes inside.
Our research indicates that the real locus of modern finance
is not the Exchange but the trading rooms. As a result, we
should abandon visions of finance in Lower Manhattan as having
a radial or mono-centric urban form - the NYSE surrounded
by trading rooms - and embrace instead a multi-centric understanding
of Wall Street. The Trade Center was not some sort of back-office
to the NYSE. Wall Street is better thought of as a web of
trading rooms in which each node is anchored to the area by
its proximity to others, rather than to the Exchange. And
instead of being miniature replicas of the NYSE, they are
more like scientific labs.
How then to keep finance in Manhattan? One obvious answer
is to replicate what was in place before the destruction of
September 11th. Build new towers (two or twenty) with exactly
the same square footage of office space and hope that the
financial firms will return. To adopt this replicative strategy
would ignore that we are rebuilding not for the next months
or even years but for the coming decades and would neglect
the important changes that have taken place within the sector.
The opposite strategy is to anticipate what finance is going
to become twenty or thirty years from now, and attempt to
design accordingly. The problem with this latter approach
becomes apparent when we reflect on the revolution in quantitative
finance that has swept the industry. Thirty years ago, almost
exactly when the Trade Center was being built as a "vertical
port," no one anticipated that it would become a center
of financial trading. And no one is likely to have predicted
that finance would go through the tripled features of the
quantitative revolution. The Black-Scholes formula for pricing
derivatives (one of the key applications of mathematics to
finance) was developed in 1973 and was hardly on the radar
screen of policy-makers. In 1973, computers were those things
the size of a room that were used to process payrolls. And
to speak about the "World Wide Web" and "high
bandwidth Internet connectivity" in 1973 might have provoked
suspicion that one's connection to reality had been clouded
by too many highs on recreational drugs. In short, the quantitative
revolution in finance would have been difficult to
anticipate and even more difficult to design for. With this
retrospection as a cautionary note, who can say with confidence
what finance will be thirty years from now?
In
place of predicting the future or of replicating the recent
past, the citizens of New York City should encourage their
representatives to rebuild Lower Manhattan with an emphasis
on increasing diversity of types of organizations - not simply
more large corporations but medium size and start-up firms,
not simply in financial services but a broader sectoral range,
not simply businesses but educational and cultural institutions.
Diversity accomplishes two tasks. First, it would make Lower
Manhattan a more vibrant and exciting locale, and thereby
more attractive to the knowledge-intensive firms that will
be a source of economic vitality for the city. Why do energetic,
ambitious, young people come to New York City? Because other
young, ambitious, energetic people like them come here too.
The more a city, or a district in a city, is a place of wonder
and excitement, the more it can stimulate these tipping point
effects. Second, greater diversity among the types of organizations
produces a broader "gene pool" out of which innovative
recombinations can emerge. Will such a strategy come from
the financial sector itself? Will it come from a city administration
lead by a businessman whose Bloomberg terminals populate the
trading rooms? Like the generative strategies - with their
lateral, heterarchical ties - that proved so resilient and
effective in the first days and weeks of recovery, a generative
strategy for rebuilding Lower Manhattan will require broader,
horizontal ties actively involving citizens and civic associations.
Like the trading rooms themselves, the new associations that
will make for innovation in redevelopment will require distributed
intelligence and the organization of diversity.
Daniel
Beunza is a PhD candidate at NYU's Stern School of Business
and a Research Associate at Columbia's Center on Organizational
Innovation. David Stark is Arnold A. Saltzman Professor of
Sociology and International Affairs at Columbia University
and an External Faculty member at the Santa Fe Institute.
He is currently a Visiting Scholar at the Russell Sage Foundation
in New York City.
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Footnotes
1
Gladwell (2000) discusses parallel efforts that exploit the
ways in which architecture and organizational form are tightly
intertwined. For example, he describes an advertising firm
in California that has re-created the geography of a village
in its headquarters, complete with notional streets, squares
and neighborhoods. Gallison (1997, 1999) shows how the architecture
of science is intimately bound with its epistemology in, for
example, MIT's Rad Lab in 1945. Whether a laboratory joins
or separates the theoretical and experimental practices of
physics reflects the view of science at the time and has an
effect on the degree of collaboration that results.
2 To date, the leading analytic strategy by sociologists studying
modern finance has been to focus on one or another of the
key components of the quantitative revolution. Exemplary,
in this light, is the recent paper by Bruegger and Knorr Cetina
(2002) who analyze one of the key trends of the quantitative
revolution, the rise of electronic markets, arguing that electronic
trading has altered the relationship between market participants
and physical space. MacKenzie and Millo (2001) focus on another
leg of the quantitative revolution, the rise of mathematical
formulae and their consequences for trading (see also MacKenzie
2002).
3 The emerging field of "social studies of finance"
brings researchers from the social sciences with an interest
in the capital markets together with sociologists who were
earlier established in the field of science and technology
studies. Its classic studies include Baker 1984, Smith 1990;
Abolafia 1996. More recent contributions include Uzzi 1999;
Zuckerman 1999; Muniesa 2000; Lepinay and Rousseau 2000; MacKenzie
and Millo 2001; Bruegger and Knorr Cetina 2002; Hagglund 2002;
Muniesa 2002; Lepinay 2002; Preda 2002; Riles 2002; Scott
and Barrett 2002; Zaloom 2002a, 2002b.
4 Our theory of arbitrage (elaborated in Beunza and Stark
2002) contributes to debates in economic sociology. Economic
sociology was founded through a pact with economics in which
economists study value while sociologists study values; they
study the economy, we study the social relations in which
economies are embedded. Our work is part of a research agenda
that breaks with that pact (Boltanski and Thevenot 1991; White
1981, 2001; Thevenot 2001; Stark 2000; Girard and Stark 2002;
Callon and Muniesa 2002; Callon et al. 2002). To constitute
economic sociology as something more than a sociology of business,
its object of study should be the problem of worth. The first
steps must be detailed accounts, across a range of settings,
of how actors engage in such fundamental activities as calculating
value and constructing equivalences. Trading provides such
an analytically privileged case.
5 The notion of distributed cognition was developed in the
work of Suchman (1987) and Hutchins (1995). Hutchins (1995)
showed how the cognitive process of navigating an American
warship is distributed (i.e., spread) across the members of
a team, its artifacts and internal and external representations.
Similarly, Suchman (1987) showed that the actions of photocopier
users emerge from contextual cues provided by the machine
- they are situated in the process of photocopying.
6 More information on the roundtable with Trade Center companies
affected by September 11th, is available at: http://www.coi.columbia.edu/pdf/infrastructure_interface_program.pdf
7 For a more elaborated discussion about how response and
recovery revealed that the interface between humans and data
is socio-technical, see Kelly and Stark 2002.
8 Charles V. Bagli, "Downtown, An Exodus That Cash Can't
Stop," The New York Times, July 24, 2002.
9
Frankfurt's DTB, Paris' MATIF (both merged into Eurex in the
year 2000), London's LIFFE, and Stockholm's and Madrid's exchanges
have already migrated to an electronic form. Other markets
such as the recent ECN-turned-exchange Island Futures Exchange
LLC, began in electronic form. And others, most significantly
the Chicago Mercantile Exchange (CME), have developed a dual
physical-electronic system by keeping its pits and developing
an electronic system, Globex, that complements rather than
threatens it (Milo, 2001; Scott and Barrett 2002; Zaloom 2002;
Muniesa 2000).
10 Proximity does seem to matter a great deal for venture
capital firms, but for them it is proximity to their new start-up
firms and to knowledge-generating sources such as universities,
resulting in concentrations in Silicon Valley, Boston, Austin,
and so on. See Powell and Owen-Smith (1998).
11 Anonymous, "The Markets Rewired," The Economist,
Sept. 22nd, 2001, p. 68-69.
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