On Ticks and Tapes: Financial Knowledge, Communicative Practices, and Information Technologies on 19th Century Financial Markets

Alex Preda

Department of Sociology and History

University of Konstanz

Please do not cite, quote, or circulate without permission from the author

This is the story of the ticker. In the age of the Ethernet, of mobile communication technologies and instant, satellite-supported price transmission, the ticker survives mostly on screens like those of Bloomberg television, or in the windows of brokerage firms like E*Trade. It is adapted to contemporary computer technologies and directed at the broad public. The narrow paper tape has been replaced by a pixel strip at the lower edge of computer monitors. Such is its afterlife. The last mechanical device was produced in 1960, being afterwards replaced by electronic ones. Its fellow travelers—the telegraph and the telephone—have been privileged by economic historians and sociologists alike, but the ticker has been rather neglected. While the relevance of communication technologies for financial globalization has been much discussed, most of the times it does not even get cursory mentions as an “also ran.” As I will argue below, the ticker played a key role in the financial marketplace.

However, the main aim of this paper is not so much to do justice to a neglected technology. The ticker confronts us with a paradoxical situation: why was it necessary to have it invented when the telegraph was already there? Why have stock prices transmitted by the ticker when the telegraph could do the same? How can we explain the tremendous success of the ticker (and its survival in the 21^st century) if it was so redundant? While the electric telegraph had been in operation since the 1840s, and the first transatlantic cable became operational in 1865, the ticker appeared in December 1867. During the 1870s, its success was tremendous and its expansion rapid. Sociologically speaking, we are confronted with a situation where financial markets, the paragon of rationalization and efficiency, rapidly adopted an apparently redundant, useless technology. While economic historians unanimously agree that in the late 19^th century financial markets grew more and more efficient, integrated, and global, these very markets were also ready to invest effort and money in useless things. Were they then less efficient than one might think? Efficiency and rationality are inextricably tied to information and knowledge. This brings us to the question I will examine here, namely that of the relationship between financial information, knowledge, and (communication) technologies. Are these latter a simple, transparent medium for the rapid, efficient transmission of financial information or are they more than that? If they are something more, and different from a transparent medium, how do they affect financial knowledge, information, and the specific forms of market rationality? What is their impact on the behavior of market actors? If we take into account the role played by communication technologies in contemporary financial markets, these are key questions, still waiting for an answer. Seen in this perspective, the story of the ticker is not just about another neglected technology.

My argument here is that financial markets-related communication technologies (in this case: the ticker) cannot be conceived as a transparent medium which (a) accelerates the transmission of market-relevant information without affecting it in any way, (b) enlarges accessibility to information without shaping investors’ behavior, or (c) contributes to market rationalization and globalization without essentially changing the social shape of financial transactions. I will show instead that the ticker was not a mere medium for the speedy, accurate transmission of price information. It profoundly changed the ways in which financial market operated. I discuss the ticker as a nexus of mutually reinforcing language and representation modes, cognitive instruments and rules, and teleo-affective structures (Schatzki 1996: 99, 103; 2001: 48; Preda 2001a).

The data I use here is provided by US investor manuals, brochures, newspaper articles, reports, investors’ diaries, and the correspondence of stockbrokers covering a period from about 1866 to 1910. This time span coincides with the period when the ticker was invented and enthusiastically adopted first in the US, and later in Great Britain. I examine not only public representations and comments on this technology, but also how individual users perceived and connected it to other technologies like the telegraph and written correspodence. My approach is that of a historical sociology of financial knowledge and technology, grounded in a reconstruction of finance-related knowledge processes from the documents of the financial marketplace.

In the first step of the argument, I provide an overview of how financial markets-related communication technologies have been treated in economic history and sociology. I show that, most of the times, they have been considered as perfectly transparent media which serve to increase speed, efficiency, and rationality. Notable exceptions here are analyses from the field of science and technology studies. In the second step, I recall the notion nexus which grounds my analysis. The third step of the argument reconstructs the discovery and introduction of the ticker on the New York Stock Exchange. The fourth step analyzes the discursive and representational changes it brought about. I show how a new transaction language emerged, together with new modes of analysis and representation. I argue that this language required new skills from financial actors and led to the emergence of new professions in the marketplace. With that, the fifth step can be taken, which concentrates on the relationships between ticker and chart analysis. I trace the origins of the chart analysis—so popular nowadays—in the new cognitive possibilities opened up by the ticker. As a new cognitive mode, the chart analysis led straight to the institutionalization of a new profession, the stock analyst. In a sixth step, I examine the ways in which the investors’ behavior changed under the influence of the ticker. In opposition to the received view, according to which modern communication technologies increasingly rationalize the behavior of market actors, I argue that their consequences are more complex. The ticker requires permanent attention and presence in the marketplace, but, at the same time, it reinforces affective ties between investors and the objects of their actions. Affective structures emerge, which may run counter to rationality patterns based on maximizing profit. In a seventh step I examine the organizational changes brought about by the ticker on the trading floor, as well as in the broker’s office. While the trading floor was reorganized around tickers and along specific lines of trade, the broker’s office bundled together several communication technologies and became a local enactment of the central marketplace. The conclusion re-evaluates the role of this communication technology in the emergence of global financial markets.

Historians of financial markets have treated communications technologies like the electric telegraph and the telephone as factors increasing market efficiency and rationality. The electric telegraph was invented in 1838 by Samuel E.B. Morse, and the telephone by Alexander Graham Bell in 1878 (Nye 1997). A transatlantic cable between North America and Western Europe went operational on August 5, 1865. Information, together with capital, flowed between markets, attracting more and more investors, making investment decisions more rational and market events easier to follow. In this perspective, the electric telegraph and, since the 1870s, the telephone, contributed to the globalization of financial markets by disseminating and speeding up financial news (O’Rourke and Williamson 1999: 215; Rousseau and Sylla 2001: 35).

These technologies “shaped the modern American daily newspaper” (Shaw 1967: 3) and made the dissemination of news easier and speedier. This increased efficiency is shown, among others, by the growing share of financial and market reports in the commercial and general press of the time. During the 1830s, a "commercial revolution" took place in the US news industry, characterized by the shift from local, specialized, advertising-oriented newspapers to regional, news-oriented ones, meant for a general readership (Schudson 1978: 17-25). The number of general and commercial dailies, as well as their aggregate circulation, expanded rapidly after 1870, propelled by technical advances in mass printing (Mott 1962: 497, 507). Parallel to these developments, the electric telegraph and the telephone were first introduced in commercial and financial centers in the 1840s and the late 1870s, respectively, and spread at a brisk pace (Burrows and Wallace 1999: 677, 1059; Stehman 1967 [1925]). Menahem Blondheim (1994), Andrew Leyshon and Nigel Thrift (1997: 335) have stressed the role played by the news industry: the rise of nationwide news agencies, together with the electric telegraph and later the telephone facilitated the access to financial news and greatly increased their speed (Geisst 1997: 81-82). Menahem Blondheim, for example (163, 170) has shown the extent to which professional investors fought for control over the news services, as well as the sixfold increase in market reports between 1870 and 1880. In this context, the speedy dissemination of financial news and the increase in their quantity attracted new actors to the market (e.g., Baskin and Miranti 1997).

Information technology thus appears as (a) a productivity-increasing economic factor (Rosenberg 1994) and (b) a transparent medium for the dissemination of information (see Figure 1). This view has been unmistakably expressed with respect to financial markets by historical analyses (Tarr, Finholt, and Goodman 1987: 69; Yates 1986). What “information” may actually mean from the sociological point of view is rather obscure. We can, however, infer that information consists in written utterances which act as props for the actors in the marketplace in their decision-taking process. These utterances describe the “state of the world” as a necessary background for the actors’ decisions. In this respect, stories, prices, reports, and more fall under the category of information. Prices occupy a special place here, since—according to a standard assumption of neoclassical economics—they reflect all the information available to market actors (Stigler 1986 [1961]). Needless to say, this is also a key assumption of the efficient market hypothesis. The presence of a large number of actors in the market, who act independently of each other, handling all the relevant information they can get, is a fundamental condition for market efficiency and liquidity (Fama 1970, 1991; Jensen 1978). These participants “compete freely and equally for the stocks, causing, because of such competition and the full information available to the participants, full reflection of the worth of stocks in their prevailing prices” (Woelfel 1994: 328). Hence: communication technologies like the telegraph and the telephone increased market efficiency because they speeded up the transmission of securities’ prices, which in their turn synthesized all the information available to market actors.

Figure 1 about here

In the past fifteen years or so, sociologists of technology have argued against the economic reductionism which sees technological systems only in terms of productivity, efficiency, and capital. They (e.g., Bijker, Hughes, and Pinch 1987; Bijker 1995: 15; Mackenzie 1990; Law 2000; Callon 2001) have maintained that such systems trigger social changes irreducible to economic processes and that the a priori assumption of separated scientific, technical, social, cultural, and economic factors is misleading. In the spirit of the strong program in the sociology of science, these authors and others (Latour 1993) have questioned the productivity of a sharp distinction between human actors and artefacts. Instead, it has been argued that both should be seen as nodes of social knowledge, relating to each other in specific ways.

In this perspective, communication technologies cannot be seen as media meant only to increase efficiency and transparency. In the words of Richard Coyne (1995: 145), information technology generates a world—that is, a complex web of human actors and artifacts which does not simply reproduce an external, given reality, but is governed by its own rules. The few sociological studies focusing on the telephone and the telegraph point at their cognitive and social complexity. The telegraph and the telephone were at the core of debates about gender in the workplace and triggered social reforms facilitating women’s access to the labor market (Bertinotti 1985). The telephone required a certain voice amplitude (which could be provided by women), introduced new speech manners, and required vocal skills which were not present until then (Siegert 1998; Bakke 1996). The telegraph, in its turn, led to the introduction of uniform public time (Stein 2001: 115). Friedrich Kittler (1986, 1998) makes the argument that such communication technologies introduce new modes of writing, which in their turn shape social reality. An example in this sense is the typewriter, which radically changed several professions (the writer’s, the calligrapher’s, the typist’s, the secretary’s), the organization of firms and public administration, and the temporal structures of office work. Accordingly, communication technologies are rather to be understood as knots of social knowledge requiring special skills from the human actors and triggering complex social changes.

While these communication technologies have been acknowledged as central with respect to financial markets and globalization, the relationships between them and the financial marketplace still await a closer sociological scrutiny. It is certain that during the later 19^th century, developments in communication technologies were closely related to financial markets, and that the US financial markets (rather than the European ones) played a pioneering role in this respect (Bazerman 1999: 41-42). Since there are several convincing arguments that the telegraph and the telephone did not simply speed up everything, but had a more profound role, such a scrutiny will help us better understand the social factors underlying financial globalization. With that, I come back to the initial argument: if they were that efficient, why did the ticker appear and why was it so successful? Besides, there are some empirical arguments (detailed in section IV) which do not fit the telegraph’s success story: if this latter increased efficiency and speed, we should expect investors to rely more on telegrams when placing their orders. The correspondence of brokerage houses and investors from the 1850s and 1860s (before the introduction of the ticker) shows, however, that good old letters continued to play a dominant role. Even after the transatlantic cable became operational in 1865, the documented cases where investors made intensive use of this technological advance are very rare. Why did investors use the telegraph only now and then? Why did they continue to write so many letters? Clearly, there is more to be investigated here.

Here I approach communication technologies (more specifically: the ticker) as a nexus of discursive modes, cognitive rules, and teleo-affective structures. These modes, rules, and structures characterize both the doings and sayings of human actors and the working of artifacts. Hence: the ticker is not regarded as a simple, clearly delineated tool, but is considered as a complex constellation of cognitive operations and instruments. At the same time, the distinction between human actors (operating the machinery) and the hardware (being operated upon) is less important here than the ways in which these modes, rules, and structures are distributed and related to each other. The notion of nexus is related to the concept of integrative social practice, which stems from Wittgenstein-inspired theories of social practice (Schatzki 1996) and provides an explanatory model for how unrelated individuals with completely different backgrounds and upbringings engage in similar, yet not identical actions. As such, this notion is a broader and more flexible alternative to Pierre Bourdieu’s notion of habitus (1990 [1980]), which requires a system of differences between fields of action and between the actors’ positions in each field. A good example of an integrative practice is popular investing, which is prominent not only nowadays, but also in the second half of the 19^th century (Preda 2001a). When investing in financial securities, unrelated actors engage in similar, but not identical actions. Each of them has her own individual pursuits. This kind of social action requires not only a disposable income, an acknowledged legal and financial framework, and a minimal level of education. It also requires a common framework of understanding, shared cognitive rules, and teleo-affective structures.

This common framework of understanding is given by representation and discursive modes—that is, the literary and visual devices through which financial markets are made intelligible to participants and through which they latter access the market. These literary and visual devices do not provide a mere abstract intelligibility, but are practical tools with the help of which actors structure their actions. For example, a financial analysis or a stock price list employs a vocabulary different from that of a satire like Tom Wolfe’s Bonfire of the Vanities. It requires a different attitude, different skills, and imposes different courses of action on the reader.

Cognitive rules, in their turn, provide the actors with special skills, and require special skills in order to be used. A financial chart, for example, incorporates skills (the user does not have to draw it herself) and requires reading skills different from, say, a financial cartoon. Most of these rules are tacit, being enacted by actors without a critical examination of their prerequisites. For example, I may be critical of a financial chart, but I do not question the geometrical and economic assumptions underlying chart drawing, or the mathematical assumptions underlying chart-drawing software programs. Rather, in reading a financial chart I take for granted that skills are distributed on humans and artifacts, and that they form a complex cognitive network.

Teleo-affective structures designate the emotional bind which cognitive rules, together with discursive and representational modes put on social actors. The argument here is that, since these modes and rules are not external with respect to social actors, but internalized, written on their bodies and in their heads, they generate emotional, affective ties. These help the actors make sense of their actions not only in “cold,” cognitive terms, but in ways which mix cognition and emotions. For example, investment bankers describe their analyses not only as knowledge, but also outline aesthetic and emotional aspects (Preda 2002; Knorr Cetina and Bruegger 2002a). They consider these aspects as intrinsic features of epistemic products.

Discursive and representation modes, together with cognitive rules and teleo-affective structures are the fundamental dimensions of integrative social practices, they are mutually reinforcing and form a nexus to which both human actors and artifacts participate. Paths of social action are made possible in such a nexus. What is more, this allows actors to reciprocally acknowledge their doings and sayings as instantiations of the same kind of practice: for example, as instantiations of “investing,” or of “following the market.” Common horizons and expectations emerge and become in-built features of practices like “stock evaluation,” “forecasting,” and the like.

Equipped with this conceptual apparatus, I will now turn to the ticker as an apparently useless, redundant artifact. Instead of treating it as a medium, or as a machine “out there,” I will take it apart into the representational modes, discourses, rules, and emotions it generated, carried along, and disseminated. The starting point is a short history of how it came into existence.
IV. The Story of the Ticker

As mentioned earlier, the telegraph did not automatically induce investors to send price information and orders by telegram, in spite of all the apparent benefits. In fact, when we examine the correspondence of investors and stockbrokers, we can see that, even after the inauguration of the transatlantic cable in 1865 and the introduction of the first telephones to Wall Street in 1878,¹ brokers still used letters extensively. We have here the example of Richard Irvine & Co., which in the last four decades of the 19^th century was one of the major New York brokerage houses. Richard Irvine catered to a large pool of British customers, which came mainly from Glasgow, Manchester, Edinburgh and London, and (rarely) from the countryside too. He also catered to Canadian customers, and his American investors covered an area between Maine and Tennessee. In short, his was a major, internationally operating house. The business correspondence of Richard Irvine & Co. with their British clients shows that in most cases orders were placed by letter; in some other cases, the New York brokerage firm wrote letters to investors, supplying them with price quotations and other information, and asked them to order back by cablegram. In 1868, Irvine still provided to some of his clients quotations which were twelve days old.

Of course, the new technology was rather expensive and investors used it parsimoniously; at the same time, the fact that price quotations were circulated by letters between New York and Europe points to the main informational problem of investors. This problem consisted not only in getting accurate information about prices, but—first and foremost—in accurate, timely information about price variations. It is rather irrelevant to know that the price of, say, the Susquehanna Railroad Co. is at $53.20. What is really relevant is whether it is higher or lower than thirty minutes ago, or an hour ago, or yesterday.

Certainly, there were price lists published in the commercial and general press. But it was impossible to determine what kind of prices were published on the lists. The practice of publishing closing prices was not common everywhere. In New York City, publications like the Wall Street Journal began publishing closing quotations only in 1868. The New York Stock Exchange got an official quotation list on February 28, 1872. In the 1860s in London, only the published quotations of consols were closing prices. Besides, some prices were compiled from the floor of the Exchange, while others were compiled from private auctions, which ran parallel to those on the exchange floor. The process of cognitive standardization was far from finished (Preda 2001a: 225).

There was also a long history of forging price lists. Stock quotations published in newspapers were not always perceived as reliable; in fact, stock price lists had a very bad reputation in the US (and not only), as being unreliable and manipulated:

The many-headed monster-dog

(Cerberus is the name in vogue,)

Seems to have left his place in H—l

With us on Earth, a while to dwell;

But, fearful lest he raise a storm,

Assumes another shape and form:

Wall Street is now the gate he guards,

For which he gathers rich rewards;

And spite of art, in cunning's spite,

The Stock-List shows him to our sight;

Its rise or fall—his appetite.

This monster-stock-list also shows,

What Milton's muse could scarcely disclose

"A formidable, shapeless shape,"

Something 'tiwxt Bull, and Bear and Ape;

A mass, with members out of joint;

A mixed-up jumble, without point;

A grand array of lies, facts, figures;

A witch's caldron—whites and niggers.²

More generally, 19^th century academic economists, in the US as well as in Western Europe, were skeptical about the accuracy of economic statistics and, more often than not, did not use them (Desrosières 1994: 170). Since many transactions were private, it also made sense to circulate private prices by private letters. Without an adequate technology for recording and transmitting price variations accurately and rapidly, it was not very sensible to rely solely on telegraph or (later) telephone communication.

This problem found its solution in 1867, with the invention of the ticker, or the "stock telegraph printing instrument." The ticker was invented by E.A. Callahan, an engineer associated with the American Telegraph Company, who had noticed that a key problem of stockbrokers was keeping track of prices. On the floor of the Exchange, prices were written on paper slips, which were lost, misread, misdirected, or forged on a daily basis.³ Writing down transactions on paper slips was a common practice among brokers in early 19^th century. For example, William Bleecker, a prominent New York broker in the 1830s, president of the NYSE and scion of the family which co-founded Wall Street, did not keep any transaction ledger (or at least he did not leave one, nor did he mention having one). His carefully kept records consisted in paper slips recording transactions. Courier boys ran with paper slips to the brokerage houses and back, making the confusion even greater. Agents listened at the keyhole for prices, wrote them down and sold the information in the street. The keyhole privilege was sold for $100 a year.⁴

The first ticker consisted of a stiletto, placed under a glass jar bell and powered by a battery, which recorded prices and company names on a narrow paper strip; it was installed in the brokerage office of David Groesbeck in December 1867. The ticker tape was divided in two stripes: the security’s name was printed on the upper stripe, and the price quote on the lower one, beneath the name. A clerk stood by the ticker, reading prices aloud. With that, the brokerage office was directly connected to the floor of the exchange and had access to real time prices. However, technical problems were soon to arise: on the one hand, the stiletto blurred and mixed up letters and numbers, instead of keeping them in two distinct lines. On the other hand, tickers required batteries, which consisted of four large glass jars with zinc and copper plates in them, filled with sulphuric acid; this, together with uninsulated wires, made accidents very frequent in the tumult of a brokerage office.

These problems were solved in the 1870s by Henry van Hoveberg's invention of the automatic unison adjustment and by the construction of special buildings for batteries; brokerage offices were connected now to a central power source (the battery building) and to the floor of the Stock Exchange. The Gold Exchange received a similar instrument, the gold indicator; a clocklike indicator was placed on the facade of the Exchange, so that the crowds could directly follow price variations.⁵ After these technical problems were fixed, the ticker expanded rapidly and several companies competed for the favors of brokerage houses and investors alike. While the figures about the number of tickers in use at the turn of the 20^th century are contradictory, it is clear that the ticker was present in provincial towns, at least between Midwest and the East Coast. The New York Stock Exchange (p. 441) claimed in 1905 that 23,000 US offices subscribed to ticker services. The Magazine of Wall Street⁶ stated that in 1890 there were about 400 tickers installed in the US; in 1900, there were over 900 and in 1902 they had reached 1200. Other publications⁷ claimed that by 1882 there were 1,000 tickers in New York City alone, rented to offices at a rate f $10 per month. Peter Wyckoff (1972: 40, 46) evaluates the number of tickers in use at 837 in 1900 and 1,278 in 1906. Bond tickers were introduced in 1919. The ticker was also mentioned in the correspondence and diaries of well-to-do New York investors. We encounter the example of Edward Neufville Tailer, a rich (though not among the richest) woolen goods wholesale merchant, who kept a diary between 1848 and 1907. When Tailer undertook a business trip through the Midwest and South in 1880, he regularly went to brokerage offices in cities like Nashville and Cincinnati, in order to watch the ticker.

At least some of the New York City restaurants had tickers in the dining rooms. At Miller's and Delmonico’s, investors could follow the price variations in real time, ordering a meal and some stocks at the same time.⁸ Private stock auctioneers also installed tickers on the exchange floor. Not only that the ticker was present in places where the upper middle classes congregated—it was also present on the fringes of the marketplace, in the badly lit, narrow bucket shops where poorer people came to invest their few dollars. So strong was the influence of the ticker and the prestige associated with it that bucket shop operators felt compelled to install fake tickers and wires going only to the edge of the rug, together with additional paraphernalia like mock quotation tables and fake newsletters (Fabian 1990: 191; Cowing 1965: 103).

The ticker became a prized possession, to be kept until a speculator’s last breath: when Daniel Drew, the famed speculator of the 1850s and early 1860s died in 1879, his only possessions were a Bible, a sealskin coat, a watch, and a ticker (Wyckoff 1972: 28).