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Question all your assumptions, MarrGwen Townsend told students at a January 27 fireside chat at the Hyde Park Center sponsored by the Graduate Women in Business and The Professionals’ Finance Club, two groups led by students in the Evening MBA and Weekend MBA programs. “It’s when you do that that you see things differently than other people.”
Townsend, vice president and cofounder of Townsend Analytics Ltd. and founder of Archipelago, L.L.C., was speaking from experience. After earning a master’s degree in economics from University of Chicago in 1976, she challenged assumptions in the financial industry when she and her husband, Stuart Townsend, launched Townsend Analytics in 1985 by offering RealTick, the first real-time trading platform for the Internet.
Later they created Archipelago, an electronic communications network that, with its best execution model, revolutionized the way the American stock market works. Initially, the move to seek out the best stock price and match its customers’ buy and sell orders online, without broker or market-maker intervention. Townsend called it “a way to get the business going that worked out to be a great idea.”
In 2005, the electronic network helped lead to a merger between Archipelago and the New York Stock Exchange. Joining forces with the NYSE had always been a possibility in Archipelago’s long-term business plan, Townsend conceded. “You’ve either got to win or you’ve got to merge,” she said. “We realized it was going to be ultimately very hard to beat the New York Stock Exchange and that they would wake up at some point and crush us.”
What saved her firm was hard work and visionary thinking. One advantage was that Townsend and her partners were outsiders, unburdened by preconceptions of how the financial industry should work. “Once you have customers you’re not likely to be the one who wants to break the eggs, so to speak. You’re trying to protect your business,” she said.
Townsend characterized her decisions for Townsend Analytics and Archipelago, however, as both strategic and reactive. The big picture is primary, “but then within that we were very opportunistic or reactive,” she said. “You’d be dead as a business if your thinking was all visionary because you wouldn’t be looking outside and seeing what missiles are coming and what problems are on the board.”
First-year student David Kedmey said Townsend’s experiences proved the value of questioning assumptions and being flexible, he said. “I think the NYSE could have evolved in time, without merging with Archipelago. But Archipelago was years ahead of the curve, unconstrained by established ways of thinking. Archipelago was more nimble and forward looking, and by the time NYSE woke up to the use of technology, the best option was to merge.”
He plans to enter the New Venture Challenge annual business plan competition and said Townsend’s presentation gave him some good ideas. “We want to provide tools for traders, a new way to search and harness the awesome amount of financial data available to traders,” he said.
—Jenn Q. Goddu