summer 2000


Merton Miller: 1923-2000

The Thrill of the Next Big Thing

E-Commerce and the Future of Finance

class notes
management conference
Power Lunch: More than 1,500 business leaders gathered at the Management Conference in May.

E-Commerce and the Future of Finance
By John T. Slania and Susan DeGrane
Photos by Lloyd DeGrane

How has the Internet affected commerce? Investing? Entrepreneurship? In the past few years, every publisher, prognosticator, and self-proclaimed expert has had an opinion on business and technology. Wouldn’t it be nice to cut through the noise and clutter and hear about the new economy from scholars and professionals you can trust?


More than 1,500 alumni, faculty, and friends of the school gathered this spring to share their experience, research, and forecasts on technology and business at two conferences: the 48th Annual Management Conference and The Future of Finance: Globalization, the Internet, and Regulatory Reform, a forum sponsored by the George J. Stigler Center for the Study of the Economy and the State.


Conference Quick Links
“Technology and Financial Services”

“Challenges of Financial Regulation”

“Attacking Inefficiencies in B2B E-Commerce”

“How E-Commerce Has Changed the Role of Venture Capitalists”

“How Legacy Firms Are Transforming for the 21st Century”

“Marketing on the Web”

The Management Conference featured 14 panel sessions, five of which are excerpted here, along with highlights from The Future of Finance. This is your front-row seat to the GSB experts as they discuss technology, regulation, and the future of finance.


The Future of Finance
Technology and Financial Services

Austan Goolsbee
Associate Professor of Economics and Strategy

Dennis Chookaszian, ’68
Chairman and CEO, mPower

Todd Ricketts
Corporate Secretary, AmeriTrade

Online stock trading is increasing 150 percent annually, according to Austan Goolsbee. As the public grows more comfortable with online trading of stocks and mutual funds, Goolsbee said, the popularity of online financial services will increase.

“We could in the future see the sale of more complex instruments, like insurance,” he said. “As sites spread, consumers are getting more information and are becoming more comfortable with online trading. The barriers of entry are being reduced.”

Todd Ricketts, a former part-time M.B.A. student at the GSB and corporate secretary for online brokerage firm AmeriTrade, said people are attracted to Internet stock trading because of the lower commission costs and the easy access to research online. AmeriTrade’s statistics certainly illustrate the growth of online trading: In 1995, AmeriTrade had 35,000 accounts; it now has nearly 1.5 million. Systemwide, there are now some 16 million online accounts, and Ricketts expects that figure to reach 45 million by 2004.

“The easier it gets for customers, the more they’re going to get into it,” he explained.

People will turn increasingly to online financial services as they become more informed and more confident that the Internet is a safe, reputable place to make transactions, said Dennis Chookaszian, ’68, chairman and CEO of mPower, an online investment advisory group, and former chairman and CEO of CNA Financial Corporation.

“In the past, investing was limited to the wealthy because you had to pay for the advice. The new paradigm is that everyone has access to electronic advice and most of the advice is free,” said Chookaszian, a member of the GSB Council.

As for people concerned about whether their transactions are protected on the Internet, Chookaszian said: “It surprises me that someone is concerned about security on the Internet with all of the security measures in place. These same people are willing to turn their credit card over to a waiter at a not-so-reputable restaurant.”--J.T.S.
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The Future of Finance
Challenges of Financial Regulation

Gary Becker
University Professor of Economics and Sociology and Nobel Laureate, 1992

Leo Melamed
Chairman Emeritus, Chicago Mercantile Exchange

As e-commerce and online stock trading spreads globally, governments walk a fine line between overregulation and being too lax, said Nobel laureate Gary Becker, University Professor of Economics and Sociology. In many cases, Becker believes foreign countries are wary of making their securities regulations comparable to those in the United States, because looser laws usually attract more money. “The question becomes, is it a race to the bottom?” Becker asked. “There is an enormous desire for capital. Is there a reluctance to introduce regulation because of it?” Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange, sees foreign markets encroaching on U.S. futures exchanges because the rules and regulations are not uniform. For example, U.S. securities law requires traders to enter a code before completing an electronic trade, something that isn’t required of their foreign counterparts. “By the time my guy puts in the five-digit number, the trade is gone. The European trader has beaten him,” said Melamed, who is a life GSB Council member. “Our complaint is that the regulatory authority in the United States bridles us. The regulations should be changed to allow us to compete.”--J.T.S.
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Management Conference
Attacking Inefficiencies in B2B E-Commerce

Patrick Blake, ’94

George Kadifa, ’89

Heather J. Shively, ’99

Mark Suster, IXP-4 (’99)

Moderator: Steven N. Kaplan
Neubauer Family Professor of Entrepreneurship and Finance

The Internet is revolutionizing business-to-business (B2B) commerce because it is attacking inefficiencies in traditional business models, said Steven N. Kaplan. B2B e-commerce improves efficiency by redesigning workflows into “e-hubs,” Kaplan said. An example of this is, an Internet wholesale automobile auctioneer. In a traditional auto auction, the vehicle is shipped to an auction site, a dealer travels to the auction, buys the car, and has it shipped to the dealership. Autodaq conducts the auction online, eliminating the dealer trip and allowing the vehicle to be shipped once, from seller to buyer.

“B2B e-commerce economizes on information and transaction costs, provides better matching of buyers and sellers and better prices, and broadens the market of buyers and sellers,” Kaplan said.

Heather J. Shively, ’99, has experienced this rise in efficiency firsthand at, a company she cofounded. By using the Internet to bring together borrowers, brokers, and lenders and cut down on paperwork, Shively says can close a commercial real estate deal in 40 days, or 60 percent faster than a traditional closing.

“E-commerce is making the process more efficient,” Shively said. “It’s all about taking fragmented markets and getting buyers and sellers together faster.”

Similarly, Mark Suster, IXP-4 (’99), is trying to make Europe’s construction industry more efficient through his B2B site called The Web site connects buyers with suppliers and offers services in design, construction, and maintenance.

“We believe we can cut costs and completion times by 15 percent by building online,” Suster said. “B2B is going to catch on once people recognize its value and efficiency.”

And Patrick Blake, ’94, has created an online hub for the purchase of manufacturing materials with the company he cofounded, Here, customers can purchase chemicals, paper, plastics, and other manufacturing materials online, gaining better pricing and faster delivery, Blake said.

“B2B e-commerce is going to happen very quickly once companies figure out how to do business online,” Blake said.--J.T.S.
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