Distance Does Matter On The Internet, Sometimes
from the speed-of-light-not-fast-enough dept
Along with many other physical constraints, the internet can make distance or location irrelevant. Things like telecommuting mean that companies don’t necessarily have to go where their employees are, though change in this regard has been somewhat slow. It’s true in the financial industry, as New York is slowly losing its role as the only place for a financial company to locate. The CEO of online broker Ameritrade once colorfully noted that his company could be located in Zimbabwe, and it wouldn’t matter (it happens to be located in Omaha). But there are some financial companies, whose businesses are also completely electronic, that are finding a need to be close to the financial centers. Traders and funds, whose strategy it is take advantage of small arbitrage opportunities only available for an instant, have found that the milliseconds difference in trade execution time can make a big difference in terms of the effectiveness of their strategy. In fact, one building in New York that houses the main computer system for electronic trading is home to 40 companies that trade using this strategy. So while the internet can eliminate many physical constraints, the physical constraints on the internet itself can have a big impact for some lines of business.