Bottoms Up! The new information polarity
It has long been said that information is power. The last twenty years has witnessed a steady increase in the quantity and quality of information that we can all access freely through our desktops, laptops, tablets and smartphones, either through the web or increasingly through dedicated apps. Digital technology has made it easier for every individual not only to access information but also to produce it. So, we have also witnessed a step change in the supply of information. We have effectively eradicated information poverty and replaced it with an information cornucopia.
There are two other aspects to the information revolution that it is worth keeping in mind: we are all now constantly connected to each other through a plethora of social networking and messaging platforms. And we are also starting to collaborate in the sharing economy and creating value that was unattainable before. This collaboration is extending to the financial world in the form of peer-to-peer lending clubs, crowd-sourced funding and information sharing networks.
The information revolution has profound implications for society. If we agree that ‘power’ is a zero-sum identity and that we as consumers and individuals have gained power, then by definition someone else has lost power. Who are the losers in the information revolution? In short, every single institution that was created in the age of information poverty – governments, political parties, religions, universities, banks and corporations. All of these institutions were aggregators of information who extracted different forms of ‘rent’ via the distribution of their ideologies, dogma, teachings and products. The financial system was able to charge a variety of different rents that included interest margins, transaction fees, advisory fees and management fees.
All of these institutions are now threatened by the fragmentation of information and the empowerment of individuals. The opportunity for extracting information rents is rapidly evaporating. Certainly, new information quasi-monopolies such as Google, Facebook and LinkedIn have emerged that are able to monetise information. But the way that these technology companies extract information rents is very different from the past. Rather than source information narrowly and distribute broadly, as our traditional institutions did, these new institutions source information broadly and distribute to a smaller group of advertisers. The polarity of information rents has been reversed. In the age of big data we harvest as broadly as possible and sell narrowly. Our world has become ‘bottom-up’ not ‘top down’.
Want to learn more about the markets and how to become a better investor?
Download the Invstr App now.
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order. Brokerage services, including fractional trading of US securities, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here. Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.