Jeff Cooper is the General Manager of Step Change Marketing. This article appears in Jeff's monthly column in Adnews - Australia's leading publication serving the advertising, marketing and media industries.
The 'Greater Fool Theory'
I recently overheard a banker friend of mine discussing the 'Greater Fool Theory'. What charming names the financial community come up with. It's only slightly less insulting than politicians using the term 'true blue'.
According to the high school student's best friend and mentor (Wikipedia), the 'Greater Fool Theory' states: "The price of an object is determined not by its intrinsic value, but rather by the often irrational beliefs and expectations of market participants". Perceived value drives the system, not actual value.
In play it means that in order to make money on the stock market, someone else needs to make a mistake. This ingrained doctrine has held strong for decades from Wall Street, New York to Bridge St, Sydney. But how accurate is it in the post-modern era?
High Frequency Trading
Michael Lewis recently published a book, 'Flash Boys', outlining the growing problem with High Frequency Trading or HFT. HFT is a type of computer- based trading scheme that takes advantage of sophisticated computer algorithms to rapidly trade securities at fractions of a second.
This skims a tiny profit millions of times a day just before the rest of us mere mortals have a chance to act on market announcements. It allows the machine to profit off the natural waves of the market; an emotional rollercoaster in every sense of the word.
The ultimate KPI is Profit!
So, should we be upset if we lose big on the stock market? After all no industry in the world is more obvious than the financial industry about what their ultimate KPI is: Profit. And not the Jesus or Muhammad kind.
Should we be surprised? Gecko told us that 'greed is good'. 50 Cent helpfully told us to 'get rich or die trying'. I don't know if greed is good, but it looks like it's not going anywhere.
In an electronic age where scamming the market is as easy as a good broadband connection, perhaps we should rename it the 'Greater Tool Theory'.
What does this say about us Marketers?
So, what does this say about us Marketers? Well, now more than ever it highlights and celebrates human creativity (or more cynically, human self-interest). We marketers seem to be famous for both.
You see computers aren't at the stage where they can create each other, or spot these sorts of opportunities at a creation level. The programs used in HFT might be considered 'smart', but they're not ingenious in their own right. They're not creators, the jammy git that conceptualised them is. He or she is the valuable one - probably some sweaty, pimply faced adolescent 'loser' driving up The Côte d'Azur in an Aston Martin, peppering the coastline with crisp $100 bills.
The opportunity is twofold: use technology now to free up your time, automate and track everything possible, then, invest the time you save in being a little more like our jammy little git!
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