Barry Ritholtz in
the flesh! How could I resist? His talk at the Princeton Club sounded interesting,
on what he called "The attention-driven economy". The basic thesis
was actually formulated
by Herbert Simon, back in 1971:
What information consumes is rather obvious: it consumes the attention of
its recipients. Hence a wealth of information creates a poverty of attention
and a need to allocate that attention efficiently among the overabundance
of information sources that might consume it.
What’s more, a quick email was sufficient to sign me up as Barry’s guest: I
realized when I got to the club and they asked me for a $40 entry fee that being
Barry’s guest is actually a very valuable thing!
Barry’s talk was actually quite short, and most of the 90 minutes was spent
in Q&A mode, with Barry using questions as an excuse to discourse upon an
impressively broad range of subjects, which may or may not have been peripherally
related to what he was originally talking about.
One recurrent theme was the disappearance of the individual stock-market investor,
who went away after the 2000 stock-market crash, and never really returned.
People don’t talk about stocks the way they used to; when you walk into a bar,
the TVs are never tuned to CNBC like they once were; online trading volumes
are a shadow of their former selves.
To which I say: Good. Individuals have neither the time nor the expertise to
even think about beating professional investors at their own game, and they
should go off and do something more worthwhile instead, like sipping excellent
cappuccinos while reading a middlebrow periodical, or playing fetch with the
But Barry’s attention-driven economy thesis is relevant too. In the era of
YouTube, there’s more clamor for peoples’ attention than ever before. And in
the era of the Great Moderation, stocks just aren’t as exciting as they used
to be. So people move on to the next thing, especially since the big money is
being made in prop trading and private equity and lots of other places which
are utterly off-limits to individual investors.
Barry is a stock trader: he thinks in terms of stocks, judges economies by
how their stocks are doing, and always seems to bring everything back to the
stock market, somehow. That’s fine; he’s a professional, and that’s what he
does. But you and I shouldn’t be thinking like that. In fact, we’d be better
off spending our time watching David Hasselhoff trying to eat a hamburger.