Ticker Tape’s Twirling Tail

Thanks to the stock ticker, technology literally replaced child labor

What did we have before stock tickers? We had child labor.

That’s not me making stuff up or exaggerating. That’s literally how it worked.

Before the stock ticker, there was child labor, actively pushing data back and forth inside your average Stock Exchange.

A horde of teenage and preteen boys, each under 16, were essentially grabbing stock quotes from each exchange, then distributing them as fast as they could through a reliable medium: Yelling. It was a chaotic system, and it was obviously a system at constant threat of breaking down.

It took just one guy who had never seen this state of affairs before to say, “Holy crap, there has to be a better way to do this.”

And that guy was Edward A. Calahan, who recalled the scene being so chaotic that he found himself crushed out of the building—which was unfortunate for him, because he had decided to go into the building because of a torrential downpour outside.

“Pushing each other to get into these narrow quarters, yelling out the prices at the door and rushing back again for later ones, the bustle made this doorway a most undesirable refuge from an April shower,” Callahan recalled of the stock-exchange encounter, dating to the early 1860s, in a 1901 edition of Electrical World and Engineer. “I was simply whirled into the street.”

Essentially, by sheer accident, he uncovered multiple problems with this system—the process was convoluted, chaotic, and error-prone. (After all, there was nothing stopping a kid from saying the wrong numbers.) And he attempted to solve them. First off, he focused on a large visual indicator for gold rates, only to find that a competing inventor, Samuel Laws, had already negotiated the rights to use such a device in the gold exchange.

But he was well positioned to solve the underlying information distribution problem. The stock market essentially needed a wire service that made it easy to track price changes in real time. Fortunately, Calahan’s day job at Western Union—back then, a telegraph giant—was an excellent fit for this particular problem.

People had attempted to build devices that could print data over a telegraph previously, but predecessors like the printing telegraph were bulky, hard to maintain, and would break down easily. (It also predated QWERTY, and used literal piano keys in place of a keyboard.) That kept them out of common use—and created an opportunity for Calahan.

And he made the most of it, by adding electricity to the mix. An excerpt from the resulting patent, 1868’s Improvement in telegraphic indicators:

In most commercial cities, a want has been experienced of a cheap and reliable indicator for telegraphing, from the centres of trade to distant business firms and operators, the fluctuations in the prices of gold, stocks, articles of merchandise, &c. Several efforts have been made to meet this want. But the machines have been costly, difficult to manage, or liable to get out of repair.

The nature of my said invention consists in a transmitting-instrument, formed as a disk, upon which are marked the signals, numbers, or words to be pointed out. Over this is an arm that makes and breaks the circuit by contact with the undulating edge of a metallic ring, and I form the receiving-instrument of a dial corresponding to the transmitting-disk, actuated by clock-work, controlled by a peculiar let-off mechanism worked by the magnet, so that the receiving-dial or dials in a telegraphic circuit are all brought to the same indicating point by the pulsations of electricity from one of the transmitting-instruments.

This was an impressive innovation, but an imperfect one. There were significant issues with synchronization, which meant that, even as the invention found uptake in the stock exchanges (presumably putting some 14-year-old boys out of work), the devices still created busywork. Essentially, someone had to go around the exchange and constantly ensure the devices were in sync. Stock tickers were already expanding beyond the exchanges—soon, manual synchronization would become impossible.

That created an opportunity for overshadowing, and Calahan got overshadowed by a future giant of ingenuity: Thomas Edison. Just four years after Calahan first patented his device, Edison came up with the Universal Stock Printer, a device that improved upon Calahan’s device by improving efficiency and synchronization. Key to his invention: The “screw thread unison,” a device that allowed transmitters to automatically keep every device in sync. It was one of the first patents filed in Edison’s name.

As Calahan notes in his 1901 article—an interesting document in which the inventor of an entire category of the device writes the history of that device—the screw thread unison turned into a basic building block of tickers:

A “ticker” at the present time would be considered as impracticable and unsalable if it were not provided with a unison device, either automatic or controlled by the transmitting operator. My first tickers were provided with neither, and yet it was at least four years before such an attachment was made.

But as the document notes, the story is far more complex than Thomas Edison taking over the market for stock tickers. In fact, Calahan’s Gold and Stock Telegraph Company ended up buying out Samuel Laws, acquiring the company for which Edison made his invention, meaning it wasn’t technically even a competitor. (Gold and Stock itself would eventually be acquired by Western Union.)

But many other competitors emerged during this period, and Calahan says Gold and Stock had to sue those who innovated upon their model too directly. But in the long run, the stock ticker would dominate the stock exchange, but later innovators would supplant it. Calahan says Gold and Stock, having rested on its laurels for too long, had been “practically expelled” from the NYSE in favor of newer, nimbler competitors.

Ultimately, Calahan succeeded at his goal—the chaos of the exchange floor had been replaced with something closer to a traditional office. Traders no longer had to hang out on the floor literally the entire day. If a rainstorm hit and Calahan was in it, he might even get into the exchange without feeling like he stepped into an 1870s mosh pit.

Calahan played an important role in this movement—and earned a spot in the National Inventors Hall of Fame for a reason. But Esdison clearly overshadowed him in the long run, despite the company keeping Calahan and firing Edison. That just gave Edison a chance to invent other, more ambitious things, on the way to becoming the greatest serial inventor of the 19th and 20th centuries.

Don’t feel bad for Calahan, however. While his stock-ticker legacy didn’t make him a household name, his follow-up definitely had a long-lasting impact. In fact, odds are that if you own a home, you may still rely on a company Calahan founded thanks to his success with telegraph-based technology.

What? You mean you haven’t heard of American District Telegraph, or ADT? Turns out, a few years after he made bank on the invention of ticker tape, he had another idea after his home was robbed: Could we use the telegraph to warn others about nearby robbers?

Bet you didn’t see that connection coming.

The problem with stock tickers in times of crisis is that, at least before the Great Depression, they slowed down

Imagine finding out that the stock market suddenly started to dip by 15%, and the stock you’re heavily invested in just took a huge bath. You’d want to sell immediately—or, at least, track what it’s doing—right?

Well, there’s just one problem with that. The data from the stock market wasn’t purely automated, and that meant that hiccups were very possible. How bad are we talking? Let’s say 152 minutes.

That’s how long the delay was on the day of the Great Crash, according to the University of Washington’s Information School. While there were many factors behind that crash, one contributing factor was that the ticker taps were increasingly out of sync with what was happening on the trading floor. The school’s Joe Janes, who recorded a podcast about the issue, put it like this:

It was likely only a matter of time, the bubble had to pop. When it started to fall, and the ticker fell behind, and then when it became clear that things were getting worse fast, it was the not knowing, and moreover not knowing what you didn’t know, that helped to feed the panic. So this is an unusual example of a document that is likely simultaneously record, and cause of, events.

And, a story of infrastructure. It’s easy to conceive of the ticker device that way, like a faucet or an electrical outlet. Behind the scenes there’s a process, a system, wires, people, tubes, whatever, and that’s all part of it too, and like any infrastructure, nobody pays any attention until it goes wrong.

Looking in newspaper archives during the late 1920s and early 1930s, you’ll see seemingly constant pieces about how trading value was just overwhelming the stock market, leading to significant delays. The Buffalo Evening News basically had a standing box on its front page during this period to say that the tickers ran so late, they could not publish stock listings, something that would probably lead people with stocks to go berserk in 2025.

While dating to the 1950s rather than the Great Depression, this informational film, “Behind the Ticker Tape,” should give you the general vibe.

These delays were a huge problem—and that led the New York Stock Exchange to invest in an upgrade called the “Express Ticker.” According to a New York Times piece of the period (tapping the sign), the way the stock exchange got around this bottleneck was to essentially redesign the system. The new system had a cutoff for high trading levels—shared only actively trading stocks, rather than all of them. In a memo signed by Erastus P. Tefft (great name), the New York Quotation Company emphasized that the goal was not to replace the existing system, but to augment it.

“The regular or ‘local’ tickers will carry full quotations at all times,” the memo said, per the Times. “The express tickers will also carry full quotations whenever they can do so without falling behind the market; but when market activity causes the local tickers to fall behind, the express tickers will commence to omit from their tapes the less active stocks, so that quotations of the more active stocks will continue to be printed without delay.”

(Also, it was faster—the move to a newer model of stock ticker increased the speed to a relatively fast 500 characters per minute, up from 285 characters—which sounds impressive, until you consider that entry-level computer modems started at 300 characters per second.)

This synchronization problem sounds quaint in the internet age, but since things were mostly analog back then, it was hard to forget. But it’s a great reminder for our current moment: When nobody knows what the hell is going on, the real risk is the gap of uncertainty.

The Great Depression was not caused because there was a two-and-a-half-hour delay in the stock tickers. But it certainly did not help.