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How do you find Alpha in a world where data is essentially a commodity? That was the question posed by the organisers of the Money:Tech conference in New York this week, Messrs. Tim O’Reilly and Paul Kedrosky.

Over the course of the two day-event, a range of speakers - including Jim Cramer, Barry Ritholtz and Finbar Taggit - agreed to disagree about the best way to “hack Wall Street”, as it were.

Because Wall Street-ers and Web-izens have two very different ways of looking at the world.

On the one hand, the Street is a closed world of proprietary models, systems and processes. Proponents of Web 2.0 stress the social - sharing, collaboration and networking.

But this latter approach, when applied to financial data and information, is anathema to investment banks and hedge funds.

As Sean Park of Sixth Paradigm put it:

The investment business is predicated on a scarcity of information…Comparative advantage is based on having information nobody else has.

But there is evidence that some investment banks and hedge funds are becoming increasingly open to the premise of Web 2.0.
JP Rangaswami (ex-CIO of DrKw, now managing director of BT Design) shared a fascinating anecdote about Goldman Sachs - as far as investment banks go, it is the biggest single consumer of social networks in terms of the percentage of its staff with a Facebook (or similar) profile.

But then again, is Facebook really that different from Bloomberg? Mr Rangaswami thinks not.

Both platforms give users the ability to interact across institutions, access news and information relavant to their interests and to message other users. Facebook even lets you email non-users (though we’re not sure there are many left) from within the platform itself - just like Bloomberg.

Moreover, while investment banks can - and do - opt to ban Facebook and its social networking ilk, there is little they can do about the relentless democratization of financial information.

Even Sean Park, who left the world of investment banking behind, is pleased about that:

I don’t spend anything on data anymore, and I don’t feel one bit less informed than I was before. Sorry, Thomson, Reuters and Bloomberg.

Besides, as financial data becomes cheaper and more accessible, analysis, judgement and sheer ability become increasingly important. Isn’t that what alpha is all about?