The Original FinTech Giant
If I asked you today to close your eyes and try to picture the quintessential professional in finance you’d probably come up with an image that looks something like this: a clean cut, well dressed professional hyped up on caffeine glaring into their dual, white backed Bloomberg monitors. If I asked you to do that same exercise in the 1980s, the image might look a lot different: bigger hair, baggier suits—probably exclusively men (although that’s arguably too common even today). However, two constants remain over the past thirty-plus years of finance—coffee, of course, and the Bloomberg Terminal.
The Bloomberg Terminal is perhaps the most ubiquitous piece of financial information technology. In fact, in 2013 the Bloomberg Terminal had a market share of 57 percent. The Bloomberg Terminal is the most widely used professional financial information platform in America and has been growing since it was first developed in the 1980s.
The man behind the terminal—and no, not our caffeine-hiked trader—didn’t start out in financial technology or news. Michael Bloomberg started out as a clerk on the trading desk of Salomon Brothers. During his fifteen years at Salomon Brothers, Bloomberg wondered if there was a more effective way to aggregate and search through news than sifting through the morning papers. Like most revolutionaries of the 1980s, Bloomberg saw computers as the future of the industry.
When Salomon brothers fired him in 1981, he took his “small” $10 million severance package to kick start Bloomberg LP, a smaller, nimbler company.
In late 1982, Bloomberg debuted his first terminal. The initial technology was revolutionary. It’s important to remember that personal computers weren’t a thing, and neither was the internet as we know it today. Instead, Bloomberg and his team at Bloomberg LP had to build their infrastructure from the ground up.
Today we’re pretty much used to seeing computers everywhere. It’s important to remember that the most high-tech piece of financial equipment before the Bloomberg Terminal was something called the Quotron, which, let’s be honest sounds like something out of Blade Runner or another 1970s SciFi movie.
The Quotron was the first device to display stock quotes digitally, rather than being printed out on ticker tape. The Quotron looked like a corded, push button phone with a small screen on it. The Quotron was a breakthrough because it represents one of the steps towards the digital age. However, the Quotron didn’t do too much aside from display stocks, and essentially just digitized an already physical service. Bloomberg didn’t settle for just digitizing a service, he would reinvent the way financial information was processed.
What made the Terminal different from the Quotron and its predecessors was its ability to integrate information, news, markets, and technology. If you're unfamiliar with what a Bloomberg Terminal can do, that's okay—because there's quite a lot they can do.
At its core, the Bloomberg Terminal allows the user access to a private network that does a couple of things. First, it can aggregate news based on topics, sectors, or keywords and then flags those news stories by their perceived importance. Second, perhaps the most well-known feature, is its ability to look up real time prices, analysis and metrics of equities, commodities, fixed income instruments, ForeEx and everything in between. In addition, you can use the terminal to look a company’s financials, see who owns what debt (it can be fun to see who owns your university’s debt) and look at the supply chain of a company. There isn’t much you can’t do on a Bloomberg Terminal—it’s a data junkie’s paradise.
The Bloomberg Terminal is obviously not a small piece of technology, and neither is its price tag. In fact, you can’t really buy one. Bloomberg likes to keep its hands on its technology. Bloomberg, therefore, leases the terminals and software for upwards of $24,000 per year in contracts that usually last for two years. There are about 325,000 terminals on lease in the world right now.
With a price tag like that, how is Bloomberg LP still the top firm in financial technology? Reuters has its own software that is far cheaper than Bloomberg LP, and there’s a multitude of online stock screeners, but none have had the impact that Bloomberg LP had on the sector. That may be due in part to the extremely high costs of creating a system like this—Michael Bloomberg did have $10 million in 1981 dollars to throw around—in addition to Bloomberg LP’s market domination and comparative advantage in the field.
Who would dare to go up against a behemoth of a company that made over $9.4 billion in 2016 revenue? Startups, of course, who enjoy the same small and nimble structure that helped Bloomberg LP come to the top back in the 1980s. One of these companies is FinTech Studios. The start-up utilizes artificial intelligence to present data, news, and information about the markets in unique ways tailored toward your needs.
While it’s unlikely that small start-ups like FinTech Studios will dominate over Bloomberg LP, it will be interesting to see what innovations will take place as these smaller companies begin to look for ways in which they can fill in the gaps.
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