The
economy has disrupted traditional economics and is fueling the need to
change business strategies and methods. Most importantly the foundation
of how we view markets must change.
Social media is adding fuel to the fire of market movements based on the influence of a new market. The market of conversations.
Previously a post attempted to cover the relevant and relative issues of "How Do Markets Move?". However even if we understand "how" not understanding "why" does not help put current market conditions into perspective.
If markets are moving we need to understand why,
what and how they are moving. We can be behind, follow or ahead of the
market. The choice is ours.
So Why Do Markets Move?
Markets are influenced by opinions. Today everyone
has been empowered by the web to express their opinion about anything
and anyone. Google's real time search now displays opinions in real
time based on whatever topical or person search criteria we seek from
the "universal library". Good, bad and indifferent opinions used to
influence us via old media models and limited channel distribution.
Today that model has been disrupted by the empowered masses whose
opinion now influences markets more than the markets influence the
masses.
Omar Hague writes: Why Controversy Won't Power Next-Gen News "
One of the new competencies the news media is going to have manage is
opinion arbitrage. In an era of media production devolved to the
masses, everyone can finally express their opinion. So publishers will
have to learn to, to put it crudely, buy opinion low and sell it high."
"To play the opinion arb game, news publishers have to stop
seeking simply the most controversial opinions. They're abundant: every
talking head can churn one out, and faux "news" of every kind is
already chock full of 'em shrieking at one another. Instead, successful
opinion arbitrageurs must seek the most informed opinions, gooey with
expertise, thick with real value for readers."
Those opinions are worth the most — and they're what readers will pay for.
"Controversy, in contrast, is worth a great deal only in terms
of low-value readers. Your average radical libertarian Ayn
Rand-worshipping global warming denialist isn't exactly a high-value
reader — just like your average patchouli-sniffing communistic hippie
isn't, either. Both are unlikely to pay for new information, because
both think they know it all already. It's the market in the middle that's worth the most; they have the highest propensity to consume new stuff: "new"s."
"Opinion arbitrage is really the game of setting the terms of a better, more meaningful debate — one that imparts readers with deep, enduring knowledge. That's what the Financial Times and the Economist, among a select group of others, have excelled at — and it's what's powering them to the top of a moribund industry."
Knowledge Will Create New Markets and Move Old Ones
Social technology is fueling meaningful topical
debate amongst peers. These debates impart new knowledge and learning
initiated by the crowds. You cna see the intent of these conversations
are relevant to learning how, what, where, when and why people seek
information. The flow and organization of information is becoming more
powerful on a dialy basis.
Google's real time search and Twitter list are but just two examples
of how information is being aggregated into intentional context which
makes finding information more relevant to the market. Vetting the
information is still a time consuming task but technology will advance
and enable us to find new knowledge in less time. As Omar suggest
content in context is what provides readers with deep, enduring knowledge that is relevant and relative to advancements that create new markets and transform old one.
Why do markets move? They move because people use knowledge to create new markets and transform old ones.