One of the biggest innovations ever on Wall Street…

was the straightest possible internet cable between New York and Chicago. This was about a decade ago when high frequency trading enabled by interconnected stock exchanges was becoming commonplace. Up until this point, it was possible that a stock was trading a $51 on the Chicago stock exchange, and $50 dollars in New York. If you could get that information fast enough, you could buy in New York and sell in Chicago, netting the $1/share in profits minus any fees. This practice is called arbitrage, and at the time it was estimated to be worth $20 billion/year.

Once arbitrage became possible to automate via computer, someone smart realized, this is a game of milliseconds. Computer programs could find the opportunities, but if the other guy executed faster than you, the opportunity disappeared. Realizing this, they mapped out the current path of cable that internet users connected between New York and Chicago, and realized it wasn’t very straight. It followed many existing rights-of-way for railroads, streets, and utilities. If they created one with a straighter path, they could cut off 100 miles of cable length and gain precious milliseconds in data transfer speed.

The people on this connection would win, those who weren’t would lose. It was that simple. An innovation alongside a prisoner’s dilemma.

I’m not sharing this to give you an education on Wall Street, but as a reminder that the innovation in your industry likely lies outside the industry. A bunch of bankers and financiers weren’t thinking about how the cable runs between New York and Chicago as a way to give them an advantage, but someone did and they were able to charge a premium for access to it.

You are probably taking a million things for granted today that could be use to up your business. It’s worth a long think about.