Stock Traders and the Attention-Driven Economy

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.

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