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Information Is The New Capital

Jun. 08, 2020 9:50 PM ETDIA, DJI, NDX, QQQ, SPY, VTI41 Comments
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BullBear Trading


  • Capitalism has reached its fundamental, existential limitation.
  • A systemic shift from capital-centric to information-centric is underway.
  • Information is the new capital.

Few readers will be unaware that our current era has been widely regarded as the Information Age. The preceding epoch of the Industrial Revolution, marked by the production, distribution and consumption of goods, is regarded to have been superseded by a world increasingly dominated by the creation, collection, storage, collation, processing, distribution and consumption of information. 1970 seems to be a generally agreed upon date for its beginning.

While the transition of the world's motive force from industry to information may be widely accepted, the full implications of that shift for every sphere of human endeavor - economics, finance, society, and politics - is far less widely known. While this is easily the subject of entire books, I am going to present an outline of its key features here.

I believe that this matter goes to the core of everything we are seeing and experiencing in finance and the economy at the present juncture. Information is the heart and substance of the very rapidly emerging and imminent new world. Information is the new capital.

Industrial Revolution, Capital, and Capitalism

Under industrialism, the generation of value added through industrial processes created surplus value (value above and beyond that inherent in the raw material, labor and energies required to produce the product) which was accumulated as capital. The control, distribution, and application of accumulated surplus value capital was of course known as capitalism. Capital could be reapplied to the same process which produced it, or it could be used to enhance and improve such a process, or it could be directed to another process or even an entirely different or new industry entirely. It was a mobile, fungible, transferable and translatable substance. The dynamic and organic properties of that substance made the explosion of transformative and amplifying human activity possible. As more surplus was generated, greater and greater populations could be supported by ever-increasing production. The disposition of ever-more

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BullBear Trading profile picture
Steven Vincent has been studying and trading the markets since 1998 and is a member of the Market Technicians Association. He is proprietor of BullBear Trading which provides market technical analysis, timing and guidance to subscribers. He focuses on intermediate to long term swing trading. When he is not charting and analyzing the markets he teaches Yoga and meditation in Los Angeles. http://www.TheBullBear.com steven@thebullbear.com

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (41)

We are all doomed
valiant - bad computer.
I have been fascinated by your insights in articles past and present - thank you. This one however is a valiant attempt at understanding change, but is badly interpreted. This is not directly the fault of the author, as he can only be as good as the information he uses. And there in lies the problem, his sources are a cadre of the incompetent. I won't explain further as it would take to long, however these explanations are available on the net and unfortunately most will never explore them. Suffice it to say, that Tesla referred to Einstein as an idiot, and he was indeed right. Yes, it all starts that long ago.
Daniel Reem profile picture
Thank you @BullBear Trading for your thought-provoking article. A well-known saying says that knowledge is power. In your article you have demonstrated rather convincingly that information is power as well. Happy Independence Day (if you are an American)!
BullBear Trading profile picture
Thanks for your comments and thanks for reading Daniel. I'm in the process of building this out with a series of blog posts, which I think will evolve into a book.

Have a great Independence Day! Celebrate!
What a masterful summation of the intersection of the secular shift in markets with the systemic shift to Information! The shift from a capital-based paradigm to an information-based paradigm is a thought provoking concept to contemplate insomuch as we're in the system, therefore, our ability to objectively observe and predict the system's possible futures is near impossible since we are subjectively bound to the system. The Sovereign Individual addresses the dawn of the Information economy/society, but to an unsatisfactory conclusion in my opinion. Perhaps it is my failing, but I remain unconvinced that the use of force to compel adherence to any system will ever be completely phased out of a human society barring our universe being predetermined and computable by some benevolent AI.

In terms of actionable intelligence, based on what I read into your piece it appears that 1) big tech may offer the best long-term (10yr+)potential equity returns, 2) that we should to hedge against potential intermediate-term (5-10yr) inflationary pressure due to monetary and fiscal policy by central banks and 3) that cash may be king in the short-term (1-5 yrs), which includes opportunistic trades, until we gain clarity regarding both the secular and paradigm shifts underway. Is this a fair summary of actions you recommend?

Again, thank you for sharing your thoughts.
BullBear Trading profile picture
Thanks for your comments and thanks for reading!
BullBear Trading profile picture
Keep in mind that the process of coming to terms with and arriving at a workable analytical framework for the emerging Information-based economy is in its first inning. The above is barely scratching the surface. Some economists such as Stiglitz have done work in this direction. But he is rabidly anti-capitalist and pro-socialist, so his work is very biased and lacks objectivity. He has an agenda. I am trying to take a phenomenological approach, looking at it as an emergent phenomenon.

I think most analysts are struggling mightily to come to terms with what is going on in the legacy financial system since they are applying methodologies that apply to capital-based systems but not necessarily to the new information-based system. So there is a lot of cognitive dissonance.
BullBear Trading profile picture
Yes, I think Big Tech is really going to be the ticket. People are freaking out about the concentration of capitalization of over 20% of SPX in the big five tech stocks. They say that guarantees an implosion. I say that would be true if we were in a market-driven, capital-based system, but the fact that it does not matter and will not matter is proof that we have seen a systemic shift. I also think that the real reason why the Fed has now gone nuclear is that it is providing liquidity to speed the transition to technocracy. That includes making sure that there is plenty of liquidity for every tech unicorn out there. There is bound to be a new gold rush into every nook and cranny of the new technocratic infrastructure, including the areas I list in the article. So aside from the Big Cap Techs, there are going to be many opportunities in startups and IPO's. The transformation is going to be blindingly rapid. While the technocratic, information based economy explodes, though, many areas of industrial economy and service economy are going to simply be wiped out. Fast.
Thank you once again for your thoughts. Your posts introduced me to Strauss and Howe's books and generational theory, and also gave me the push to discover Patrick Wood's Technocracy Rising. Now I am going to order Gleick's book, but I am gobbling these books up and will need more to read soon. Do you by chance have a recommended reading list you could share? You are introducing me to many new and fascinating concepts that I might never have found on my own and I would like to continue that. Keep up the great work!
BullBear Trading profile picture
Thanks very much for your comments and thanks for reading!
BullBear Trading profile picture
The original Technocracy magazine is very interesting.

BullBear Trading profile picture
Right now I am diving into Joseph Stiglitz, but he is rabidly anti-capitalist and pro-socialist and is really an architect of Technocracy. But it is important to understand his work on information economics because it provides much of the framework for the new system.
The beginning was actually quite interesting. After that, you lost me several times (even if I still pushed to the end).
"deflation, which we can read as the accelerating tendency towards the degradation of the value of capital": I will say that I disagree, but I even think this is definitely wrong. This could probably be true for inflation. But I don't think deflation "degrades the value of capital", quite the opposite.

I believe you may have used the wrong concepts (of inflation and deflation) for what you had in mind. Also, keeping on OPPOSING information and capital seems odd to me. Always making as if information was replacing capital seems quite silly to me.The importance of information, that most growth will be information based, and all you want, sure.

"a new system based entirely on information is the inevitable way forward."
So we will eat information, shelter with information, pay for our morning coffee at starbucks by telling a secret (giving information) ? Oh no, my bad, we won't drink coffee anymore, we'll drink information ;)
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Thanks for your comments and thanks for reading.
BullBear Trading profile picture
This is just an outline and everyone is just in the early stages of coming to terms with this shift. By necessity it is very condensed, but I do hope to unpack much of what is written above in future articles, as well as expect to revise things as I go. Yes, I am definitely redefining terms, such as inflation and deflation. These are phenomena that are very poorly understood, even in the context of capitalism. On the other hand, I may end up doing better to choose a new lexicon, since terms like inflation and deflation carry so much baggage, leading to confusion.
BullBear Trading profile picture
We don't eat or drink capital either. Capital and Information are, I think, best considered to be the blood of their respective systems. They are the systemic substance. And yes, they do have substantially different origins and properties. Capital originates from the value produced in material transformative processes. It also originates from intellectual knowledge about such processes. It can be represented as financial instruments but cannot be created by finance. Financialist tools such as debt, stock markets, fiat monetarism etc do not create capital, they merely circulate it and amplify its effects. And provides financialists with the opportunity to "skim" capital from the system.

Information originates from a higher order of abstracted knowledge about material and intellectual processes and interactions. Data about the production, distribution, consumption and disposition of any material or non-material product, process, intellectual property, bit of knowledge, idea, meme, thought, feeling or about the dynamic interaction of all of these (and more) is the substance of the new Information-based economy. Understanding this would involve thoroughly entering into consideration of the processes and complex interactions of creation, collection, storage, collation, processing, distribution and consumption of Information. It's abundantly clear that this is the vital stuff of the new economy, and that it's of another order and a different substance than capital. I'm not the only one saying that. There are many who are working in that same directions, across many disciplines. Glieck's book is a good place to start.

It is challenging because we are now required to reframe everything in the light of a new understanding. We can all be forgiven if we would prefer to keep looking at the world through the same lens that we have. Problem is it is not going to work. Analysts are struggling to make sense out of what is happening now precisely because they cannot come to terms with the shift that I am attempting to describe here.
JamibleLector profile picture
Fascinating work!
BullBear Trading profile picture
Thank you sir and thanks for reading.
jprizzuto profile picture
way to much information in this post.
can you please just stick to trading.
as in- how can i make money over the next few weeks!
Windy Hill profile picture
@jprizzuto -- Not everybody on SA is a trader. And this is far better than the annoying political s%$* we seem to be getting more and more of here from the Twitterverse!
jprizzuto profile picture
@Windy Hill - lol, definitely better then the political s%$*
BullBear Trading profile picture
Actually this information is vital for the trader. If you continue to frame the world through the lens of the old system, using methodologies that applied to capitalist economics and markets that basically no longer exist, then you are bound to have trouble trading! This very understanding has kept me and my members at BullBearTrading long consistently from the bottom.
Windy Hill profile picture
Actually, intellectual property is the new capital.
Windy Hill profile picture
Expanding a bit --- "information", meaning content, is important: this includes movies, music, twitter feeds and all the way to consumer purchase histories and heart rates, and IOT sensors reporting real-time health of a machine tool or aircraft engine and most of this is IP. But IP also includes drug patents, proprietary algorithms and other inventions whether patented or "trade secrets." Creating this IP costs money -- human labor and, yes, capital. But re-creating it (producing copies of the original) is very low cost--practically negligible in terms of capital or labor costs. By contrast, human services -- doctors, lawyers, consultants, and the like -- have non-negligible marginal costs: they don't scale. The return for replacing any human service with a zero-marginal-cost AI is very, very, very large.

While it is true that physical goods requiring physical capital for raw materials and having more or less constant marginal cost to reproduce are not going to disappear, their importance in the overall economy is steadily declining. And that's not just because information-based services are growing more rapidly, but also because inventive people are finding ways to substitute information for physical goods. A current example--driven more by necessity, to be sure--is the substitution of "virtual meetings" on Zoom and the like for face-to-face collaboration requiring office space and commuting or business-travel equipment (public and private transportation goods.) And cameras and flashlights? Mostly replaced by a few circuits in your smartphone.

So physical capital will not disappear but will decline, although physical robots will replace labor for jobs requiring physical action. and eventually we'll start building space colonies and terra-forming Mars. Financial capital will be needed--to pay people to create IP. But here the picture gets murky. What if more and more "creative" work --that done by scientists and entertainers and engineers-- is produced by AI? And what if AIs themselves are able to create and "train" other AIs? Who ends up owning all that value?
BullBear Trading profile picture
Thanks for reading and commenting
BullBear Trading profile picture
You are looking at "Intellectual Property" as Information Property, but that is not what I am getting at. That's really a subtopic in microeconomics. I'm looking at Value as the underlying property of what an economy does. The entire problem of Economics is a lack of a well-founded theory of Value. What changes over time, throughout history, is the mechanism by which Value is generated. I'll be getting more into the details of that in my next post.
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