Why We Need Speedy Connections

During the first half of the 19th century, cotton merchants in the U.S.and Liverpool did a lot of guessing. New York merchants had to wait two weeks for a boat to dock in Liverpool and another two for it to return. Imagine waiting that long for information about the market. And even then you would be uncertain about price and quantity. The market could easily have changed by the time the next shipment arrived.

These delays created inaccurate prices and quantities…until the telegraph.

Once facts could travel by cable, markets became more efficient. Merchants knew how much to ship. Their clients knew what a shipment would contain. Everyone could plan more knowledgeably.

You can see the impact of the telegraph on pricing accuracy:

Where are we going? To the how speedy connections can transform markets.

Internet Speed

Taking huge leaps, we can say that we have moved from a telegraph that transmitted words and numbers to the telefax with images to the internet.  And somewhat like the telegraph, the internet transformed how fast we could move information.

So let’s see how fast.

Globally, Singapore and Sweden have the fastest internet potential:

And here is a look at the world. The darker the blue, the faster the connection:

Our Bottom Line: Information Frictions

The movement of market facts can be restrained by information frictions that range from inadequate technology to inappropriate human capital. But when we “grease” those frictions with a telegraph or a speedy internet, we cut the time between a forecast and consumption…and make markets more efficient.

My sources and more: Thanks to marginal revolution for alerting me to the Quartz article on speedy internet countries and to this report. From there, the leap to understanding internet speed took me to Science Friday.  Finally, I was reminded of this perfect complement, the Peterson Institute podcast on 19th century information and this article (my source for the telegraph price graph) with more detail.