Searcher The Millennium Issue Volume 8, Number 1 • January 2000

Y Not 2 K? Or, Virtual Is Its Own Reward
Lysbeth B. Chuck Senior Partner, CQ&A

To be perfectly honest, when I began these columns on e-commerce for Searcher, I wasn’t particularly thrilled about the subject — commerce? Even electronic commerce and the Internet — what, truly, did any of that have to do with libraries and the information profession? Fortunately, I am a dedicated member of the Southern California Online Users Group, a 20+-year-old organization (co-founded by Searcher’s inimitable editor, Barbara Quint), whose members tend to think about issues in librarianship and the online industry in contrarian, controversial, confrontational, iconoclastic, and highly idiosyncratic ways. So I decided that if I brought the SCOUG mind-set to Searcher’s evaluation and analysis of e-commerce and what it is doing, or could do, to librarianship and information professionals in general, perhaps something of interest would emerge. And indeed it has.

Now, the lure of being a columnist, as opposed to a straight journalist, is that one is expected to think, and to think about everything, no matter how outrageous or politically incorrect. Columnists don’t just research and report; they analyze, ponder, and sometimes even predict. So, with the help of Searcher, I did indeed research, report, analyze, and ponder about all kinds of things.

One column looked at the future of book-selling and publishing. What would the advent of e-commerce do to commercial sisters of the information profession? In another I tried to explore what might happen if our concept of money, of what constitutes the medium of commercial exchange with which we buy and sell books and information and access to information, changes. I examined the idea that if money as we know it does change because of “digicash” and “electronic wallets” and the ability to charge in fractions of a penny — in short, because of e-commerce — then, of course, all the economic algorithms that we use to determine value and upon which we base our current earning and spending expectations and habits will have to change as well.

I looked at disintermediation — the power of Web-based economic transactions to bypass traditional middlemen (the traditional tax collectors) and the theory that e-commerce might eventually undermine our current tax system and permanently change the nature of our tax-supported institutions, such as libraries. I looked at the impact of the Internet on traditional market research in two different ways, examining both the idea that, on the Internet, each individual can “own” his or her own personal demographic information, and sell or barter it to their own advantage, not someone else’s. Conversely, I looked at the possibility that Internet “appliances” may invade our homes and businesses, making things easier for us on the surface, while gathering ever more valuable market information about our work habits and our lifestyles and making that information ever more widely available.

I looked at why both library school and business school graduates need to understand electronic commerce in order to fulfill their professional potential and at what the Internet and the idea of electronic commerce and virtual communities have already done, and what they might do, to curricula at institutions of higher learning.

God and the Information Profession
The “something of interest” that emerged from all this research is a proposition that proceeds naturally from the confluence of two elemental themes, themes that have run consistently through all the literature I’ve seen on electronic commerce. The proposition is this: It is no mere coincidence that e-commerce is emerging and becoming more and more important and bringing about more and more changes just as we are recognizing and attempting to solve the Y2K problem. It is just God’s way of telling the whole world about the importance of the information profession.

Don’t laugh. If you’ve been an info pro for as long as I have, and if you’ve prayed as hard as I have for something to justify your dedication to, and love for, a job that traditionally undervalues your time, overutilizes your skills, and underpays your salary, this is great news. And, it’s pretty easy to substantiate. The two core concepts that emerged from my research led me to this wonderful conclusion rather simply.

First, look at the tendency of Internet technologies to favor the common man and to mitigate for more democratic and egalitarian outcomes. The Internet does this partly by providing like-minded individuals with unprecedented access to each other, thereby creating virtual communities and possible new markets; partly by leveling the business playing field by making more information, and more different kinds of information, not just available, but actually accessible; and partly through what is known as the “Net effect,” a term applied to the leveraging of technology that has come about through the growth of the Internet. In other words, for the price of a PC, some software, a modem, and a monthly ISP charge, you have a multi-billion-dollar telecommunications network at your disposal, just as if you were IBM.

Second, witness our society’s response to the Y2K problem itself, Y2K being the technical glitch in computer date systems that, come the millennium, threatens the viability of that same multi-billion-dollar technological infrastructure. Whether you dismiss Y2K out of hand as an artificial crisis manufactured by consultants, or run off to the Canadian Wilderness and start keeping wolves as pets, the fact is that here, at the end of our 20th century and the beginning of humanity’s next thousand years of existence, almost everybody in Western civilization has come face to face — finally — with the consequences of the unthinking and unquestioning embrace of technology. Now we each have to make up our minds about how we plan to deal with it.

Daytrading: A Case in Point
With regard to the first idea — the Internet as a force for democracy and egalitarianism — let’s take a look at a real-life, real-money instance. Let’s look, in fact, at the much-maligned profession of daytrading, where the ability to exchange funds for goods via the Internet and its progeny — intranets, extranets, and the like — has had far-reaching consequences.

David Barboza wrote the following in The New York Times:

Despite regulatory concern about the growing world of daytrading, some leading U.S. investment firms and securities exchanges have held talks in recent months with a number of daytrading firms.1
Fidelity Investments, Lehman Brothers, and Instinet, a division of Reuters Group PLC, have discussed adopting the software platforms of daytrading firms, forming alliances with them, or making outright acquisitions.

Why would big companies want to get involved in such a small industry with a poor reputation and an uncertain future?

The electronic trading boom is forcing them to look for cheaper and more efficient trading formats. Daytrading firms, which in the 1980s and 1990s paved the way to faster and cheaper trading that rankled the powers on Wall Street, now have critical experience in developing and using advanced trading and trade-routing software — systems that could someday give all investors instant access to the financial markets [emphasis mine].

Wall Street giants have little or no interest in the computer-jammed offices where daytraders converge. Instead, they want the software and in some cases the transaction volume generated by these smaller firms.1

Daytrading — which is emphatically not “investing” — is not really all that new. What is new is the unprecedented number of people who can indulge in it, thanks to the changes brought about by Internet technology. NASDAQ (the National Association of Security Dealers Automatic Quote system) spawned daytrading. Unlike the New York, American, or Pacific stock exchanges, the Chicago Board of Trade, or other well-known stock and commodities exchanges, NASDAQ has no central location or trading floor; it is an electronic stock market, or — more traditionally — an ECN, or Electronic Commodities Network. In short, NASDAQ has always been what we would now call a “virtual” marketplace.

Typically, when a person trades a listed stock, they place a limit order with a broker, who may be a “regular” broker or an online one. The limit order specifies the price the customer will either accept or pay for that stock. If the brokerage firm where the limit order is placed is a “market maker” in the stock — in other words, if they buy and sell those securities whenever they find a demand — then the broker frequently gets the chance to buy the stock at very low prices and sell it to buyers at the prices they request. The broker pockets the difference, known as “the spread.” If the broker is not a market maker in the stock, then the order is electronically forwarded to a firm that is. And — guess what?

Customers are rarely allowed to trade inside the spread, even if their buy price is the same as another’s sell price. Market makers can also leave limit orders unexecuted until the market moves — either up or down — to a point where they get the most profitable spread.

This practice proved so lucrative that market makers would pay retail brokerages for their ‘order flow,’ meaning that for a fee, a market maker would get to fill all the orders a brokerage generated.

“They’re basically getting kickbacks at the end of each month and their clients don’t know anything about it,” says Jim Lee, Momentum’s president, who also leads the Electronic Traders Association, which is based in Houston.2

Daytrading has grown quickly because of the Internet and new software designed to utilize it. It is not the same as being an online broker — in fact, to distinguish daytraders from online brokers, remember that “real daytrading systems give you Level 2 quotes, which show what the market makers are doing, and instant order execution through electronic communication networks, or ECNs, which give your orders the same status as those of market makers.”3 And, according to Kathleen Sindell, a professor of personal finance in Johns Hopkins University’s MBA program and author of Investing Online for Dummies, the upshot is this: “Since the ECNs have come into being, the spreads have lessened. The forecast is that the ECNs will eventually drive out spreads altogether.”4

And that, of course, will change the character, and certainly the profit margins, of brokerage firms forever. In fact, small investors, whether they daytrade or not, may save billions just by paying smaller transaction fees.

Now, before you rush off to sign on to the Internet and put your life’s savings into the Next-Big-Internet-Startup, and I’m accused of leading the entire profession into bankruptcy, let me explain again that using an online broker like eTrade, even if you place orders every day on your lunch hour, is not the same thing as daytrading, which requires special daytrading software. Daytrading software typically installs on a home or office computer using CDs or files downloaded from the Internet. It gives you access to very important information — it lets you see exactly what a broker sees, the same prices, first and second level (the market makers’ prices) — that traders around the world ask for and get on stocks. There’s even software that allows you to trade in the even bigger, largely unregulated, and highly volatile foreign exchange, or forex, market. In fact, according to The Washington Post, “Fueled by the same technology and investment mania that landed the stock market in American living rooms, global currency is taking off as the latest rage in daytrading. Thousands of ordinary people, ushered by new Internet-based businesses, are venturing into the $ 1.5 trillion-a-day world of foreign-currency trading, shaking up yet another bastion of Wall Street with the World Wide Web.”5 And all because information once exclusive to Wall Street traders has now become almost universally available.

Such companies as TradeCast, Momentum Securities Management Co., Gro Corp. (all based in Houston), and privately held companies such as Broadway Trading (Manhattan), (New York), and Cybercorp (Austin, Texas) produce daytrading software. These companies market the software directly to an estimated 4-5,000 traders in the U.S., as well as to the 62 daytrading firms in this country that handle their trades. The speed-of-the-net software “virtually bypasses the broker,” says Bobby Earthman, president of TradeCast.6 [For more information on these firms and others, check out,, and]

Daytrading hasn’t just opened up opportunities to more people to trade stocks — according to some, it is actually driving the U.S. stock market and is probably responsible for the craze over Internet stocks. David Cushman at ITG Inc., an electronic broker for large financial institutions, says his research shows that small investors — most of them online — account for three-quarters of all trading volume in two of the hottest Net properties, and Yahoo!.7 And have those stocks gone up in value? Well, according to an interview with Ray Johns of and Marc Beauchamp of the North American Securities Administrators Association (posted on the Online NewsHour Web site in September), Yahoo!’s stock costs 1000 percent more than it did last year and’s 1500 percent. Even those who don’t think that daytrading actually drives the market usually agree that the added orders placed by daytraders still have the impact of increasing the liquidity and volume seen in the markets.

Come the millennium, daytrading may follow other online activities and go global. Early next year, Clive Cooke, a senior U.S. broker and chief executive of Intercapital USA, plans to bring daytrading to Britain by launching a trading floor in London that allows British traders to deal in Wall Street shares, with full access to the U.S. markets. Who knows what changes that will bring to stodgy old Wall Street?

In short, putting aside the issue of how honest or dishonest most daytrading firms may be, or how successful or unsuccessful most actual daytraders are, one can argue that by bringing e-commerce capability to the financial markets, daytrading is in the process of changing the very structure of American capitalism. It’s turned the tables so that all it takes to enter the high-stakes world of letting your money make you money is the price of a PC with the appropriate software, a modem, an ISP, and a modest trading account. As mentioned above, that gives anybody — you, me, or Joe Sixpack — access to the vast community of traders already online, many of whom run authoritative and educational Web sites, as well as to the multi-billion dollar network infrastructure that supports the markets, and access to the same information that a Wall Street broker sees. For good or ill, that means a much more democratic and egalitarian financial world.

This kind of change may reflect, in many ways, the impact that e-commerce will continue to have across the commercial world. Who would have thought, 20 years ago (when EDGAR was a pie-in-the-sky project we all hoped might bring more current and more accurate investment information to the desktop) that someday a guy at a keyboard in NowhereNowayNohow, USA, could compete with a broker in a Merrill Lynch office on Wall Street for a block of blue chip stocks? Thanks to electronic commerce, I can sit at my desk and buy stock from Bill Gates, books from Brazil, euros from Switzerland, and clothes from Harrod’s.

I throw in Harrod’s as another example of the egalitarian effect of the Web because, while you can still get turned away from the door by the guards at their flagship London store if you’re dressed in scuzzy jeans and a SCOUG Retreat T-shirt, Harrod’s just opened their online storefront. Anyone can shop there. On the Internet, no one knows you’re a dork.

The Y2K Bug
What about Y2K in all this? One has to agree with the headline of Dave Barry’s January 1, 1999 column, “Let’s Not Call 2000 the Year of the Computer.” In fact, I propose that we call it “The Year of the Information Professional.”

I’m not just an information professional, I’m a pretty wired person. I Bank@home. I e-mail my friends. I buy books, records, clothes, gifts, stamps, pet supplies, office supplies, and even gourmet food on the Internet. I own a rocketEbook and use it. I send animated Blue Mountain birthday cards to family members. My partner and I run our consulting business with PCs and a Web site. Pretty soon I’m going to have to select a new electricity provider; I’ll probably do that via the Internet, too.

So here I am, part of the emerging population of new e-consumers. Obviously, I’m not a Luddite, but I do have one foot in the Y2K Armageddon camp. I believe we will see many, many problems spread out over a number of years stemming from Y2K, everything from economic slowdown in parts of the globe to continuing minor problems with the power grid in this country to malfunctioning devices and unreliable systems. As a result — like any businessperson moving into e-commerce — I’ve had to reconfigure my computer system, think over what I really want to do with it, balance the pros of new software capabilities with the cons of Y2K readiness, analyze my cash flow and my lines of credit, determine whether or not it’s efficient to go back to physically shopping for everything, or just some things, and if so, which things. I’ve had to decide what records to keep electronically, what to keep in paper, and what to dump. And my personal, contrarian, controversial, iconoclastic view is: (1) This is not necessarily a bad thing; and (2) Thank God I’m a librarian. My info pro training has prepared me for all this very well.

A Promising Future
And that leads me to my original conclusion. E-commerce, enabled by the Internet, is bringing structural and procedural changes to every element of our economic lives, which daily become more and more technology-dependent. Y2K forces us to examine this dependency in detail and to make choices about technology that we never even thought of before — like, do we really need this? That examination, in turn, underscores more and more the value of professionals who understand complex systems and multiple sources, professionals who can accurately identify, swiftly access, easily archive, and efficiently distribute mission-critical information.

So, if we handle the millennium correctly, January 1, 2000 could be a watershed — not just the TEOTWASWKI [in the world of obscure acronyms, “The End of the World as We Know It”], but the beginning of a new one, the beginning of a world where we have learned to embrace technology, but not its unintended consequences; a world where we separate the wheat from the chaff and the real information from the noise; a world where information professionals are finally recognized as key players at all levels of our society.

Imagine a world where you choose a specific technology for a specific task based on how appropriate it is, not just its cost or its availability. That’s a possibility in the next millennium. Imagine a world where “real time” exists outside computer processors, and we treasure it and enjoy it, instead of “spending” and manipulating it. Imagine a world where the promises of better health, longer life, a more secure future, and more — not less — leisure time — the promises that technology originally held out to all of us — are actually kept. Imagine a world where a patron comes into your library looking for information and asks for an encyclopedia, not a terminal.

Y2K is God’s way of telling us not that technology is bad, but that we have lost control of it and have become far too dependent on it. The challenge is this: We can solve many of the upcoming Y2K problems, and we can channel many of the economic changes brought about by e-commerce, in ways that will perpetuate and intensify our current dehumanizing and ecologically unfriendly economies. Or we — with the help of good libraries and good librarians — can solve them “correctly” and make the next thousand years more than just the Third Millennium. We can make them a Second Chance.

1. Barboza, David, “The Markets: Market Place; Why Big Firms Are Courting Day Traders,” The New York Times, August 13, 1999, Section C; p. 1; column 5.
2. Buggs, Shannon, “All Part of the Expanding Importance of Technology in the Markets: The Creation of a Straight Line Between the Investor and the Trade, Real-Time Portfolios, Ease, Efficiency and Widespread Day Trading; A Report on a Growing Phenomenon,” The Houston Chronicle, August 16, 1999, Section: Business; p. 1.
3. Rubino, John, “Successful Daytrading Takes Tools, Training”; Special to; August 20, 1999, Section: Funds; Stock Strategies.
4. Buggs, Shannon.
5. Dugan, Ianthe Jeanne, “Do-It-Yourself Traders’ Riskiest Purchase: Currency,” The Washington Post, August 12, 1999, Section A; p. A01.
6. Buggs, Shannon.
7. Meyer, Michael, “Fast, Yes. Easy? No.,” Newsweek, January 11, 1999, U.S. Edition, Section: Business; p. 42.
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