Today’ s electronic exchanges may not appear to be auctions, but they are. In fact, quoted prices of shares, bonds and other assets are invitations backed by market makers. Speedy, digital, global auctions, but intrinsically the same as noisy, in-person setups of old.
Modern auctions
Our intangible inventions- the limited company, the stock market, and auctions combine in a critical way. In fact, they have long been one in the same. Stock markets began as chaotic open-cry systems, where traders shouted their bids from trading pits and brokers furiously recorded transactions for ownership- or part ownership- of traded assets.
Today’ s electronic exchanges may not appear to be auctions, but they are. In fact, quoted prices of shares, bonds and other assets are invitations backed by market makers. Speedy, digital, global auctions, but intrinsically the same as noisy, in-person setups of old.
The rules, locations and goods under the gavel have evolved, but the commercial utility has remained. Auctions consistently unlock hidden demand, flushed out fair value and create urgency- three forces every business still battles with( or embraces) today.
Modern auctions
Fast-forward to the 21st century and auctions have exploded far beyond art halls and shipping yards. The internet allows for all manner of auctions. The iconic innovator in this realm is eBay, which made the auction the default mechanism for the internet’ s early peer-to-peer commerce.
Google and Facebook built trillion-dollar advertising empires on the back of real-time auctions for attention. Telcos across the world bid for radio spectrum via government-run auctions designed to maximise public value and efficient allocation.
Even the most sophisticated markets rely on this ancient idea: electricity grids balance power supply through continuous auction clearing; carbon markets price emissions allowances through competitive bids; investment banks use auctions to place shares in initial public offerings( IPOs).
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