Things That Go Bump In The Night: IEX, Bitcoin, And The Smart Money

The human animal prefers to live in an unchanged environment. Fear of change is an instinct in every species. For good reason. The salient factor about yesterday, in the world outside civilization where in earlier millennia human instinct was created, is that today’s creatures survived it. The instinctive moral is, make today as much like yesterday as possible, survive again. Repeat.

And this instinct, translated into the world of finance, is a fundamental tenant of investment — the greater the uncertainty of a project or investment, the greater must be its expected payoff.

Financial innovation, when it becomes an important factor in determining the future financial landscape, inevitably requires management of the normal human aversion to change. But will the innovators account for the threat they present, and defuse the fear they inspire? Or will they instead see the fear they inspire as reason to assume an adversarial posture?

As I watch the unfolding story of two developments in financial technology, the new transactions technology associated with IEX (Private) – a putative exchange that seeks, through technological change, to redress the balance between the interests of the buy side and the sell side of the market for investments; and Bitcoin – a crypto-currency

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