Zero Beta

Yesterday I read through Dash of Insight’s comment on a post last week from Abnormal Returns as well as a older post by Daily Options Report..  It’s a given that when Abnormal Returns writes a post it should always be read as they truely are too few and far between, and I have always found Dash to be a very insightful blog and much different then the econoblogosphere standard, and while I don’t always agree with what he says I always read it.  Anyways I have commented in the past on the nature of the econoblogosphere (see this and this) and enjoy the discussion tremendously and would like to add a few thoughts.

A major theme amongst the articles is the need for a “gatekeeper” as well as the idea that what is most popular is not necessarily most helpful.  First off I believe that Abnormal Returns is the best example of the paradox that arises.  Abnormal Returns is far and away THE best as well as most useful financial/economics blog Aggregator out there.  It is a real shame, but unfortunately Abnormal Returns’ excellence and usefulness cause it to be one of the less valuable of the major Aggs (and hopefully this dynamic can change).  Why is this the case?  Abnormal Returns’ value comes from who Abnormal Returns is and what he or she does.  Every day I begin my journey through the econoblogosphere through Abnormal Returns because I know I am going to get the 10 or 20 most relevant and unique blog articles of that day.  Abnormal Returns has a talent in not finding just what Abnormal Returns thinks is relevant, but what IS actually relevant - and there is a difference.  If you pay attention, Abnormal Returns seems to always have daily and weekly ongoing themes, subthemes and discussions that are seamlessly weaved into the linkfests.  Whether this is intentional or not, it is something that is a unique skill and could not be easily replicated by someone else.  Abnormal Returns is a one of the most significant financial journalists around, but rarely writes anything.  Thus it needs to be independent and objective, and not have ad revenue or be owned by a financial media provider to be successful - a real Catch-22.

The above was not intended to be an Abnormal Returns lovefest, rather to illustrate a much greater point.  You always learn less from those who are seeking to maximize profits, power, or fame than those who seek to grasp and share truth.  There exists a perverse incentive in the market for truth and knowledge, and this is probably more due to the lack of a market for those things (as Dash points out).  Most people don’t seek truth, but seek acceptance.  As someone who hung out with many different groups of people in high school, I would learn much more useful knowledge speaking with some “nerd” from my AP English class on the way to lunch then you would learn from spending years hanging out with the popular kids.  While a few of the “popular kids” were incredibly insightful, they were not valued by the crowd based upon their insight but on their ability to assimilate.  In reality, the irony is the popular kids are by and large the most average of a group of students in many ways and the less popular the most unique.  I’m sure many can both relate to this and attest to its universality beyond the confines of high school.  In fact I believe that popularity can many time cause mediocrity and behind a popular person, artist, blogger, analyst, company, athlete, etc is a very unique person who at one time shared some sort of “truth” and as they became more popular are essentially held hostage by the desire of their followers, who by nature will be much more mediocre, to relate to them.

From the philosphical to the more practical, there is really no easy fix in the investment/econo/financial blogosphere.  I believe that what is interesting is the “bearishness” and many of the arguments that has characterized the rise of the econobloggers has proven to be a truth and has brought many mainstream visitors who in reality are much more likely to be interested in an underlying truth only when it becomes obvious - thus the mediocrity.  The next few years will be interesting to see how the “popularity” of the econoblogosphere manifests itself.  A reader posted a comment on Dash’s article which illustrates this “

If the consumers of this information don’t attach much value to truth and geniune insight, there will be very little incentive for people to produce it.  I also think many people are overlooking the obvious.  In regards to financial advice, what is most popular is rarely, if ever, the most profitable.  Thus, it is impossible to imagine a reality where the most popular bloggers or journalists provide the most profitable and/or helpful information to the masses. An idealist with the notion that it “should” be the other way around, is virtuous in his pursuits but I believe will eventually be disappointed in his results.

Nicholson says it best in “A Few Good Men”: