Noah Smith is an interesting fellow. Sporting a background in physics from Stanford University, he is an assistant finance professor at my alma mater, Stony Brook University. He is also fluent in Japanese, and can be found in Japan when classes are not in session.
If that background isn’t eclectic enough, he writes a thought provoking webblog called Noahpinion. I first took notice of it about two years ago, mostly because it is more relevant to investors than the typical writings of most academics.
Last week, he penned a very interesting post, titled "Heroes of Blogging" (he includes a few kind words about your humble author). The temptation is to create one’s own list of blogging heroes, but instead I want to focus your attention on the impact of the entire financial blog format -- on markets, investing and financial journalism. In my biased and not-so-humble opinion, the world of finance blogs has grown into having a surprisingly large impact on modern finance.
How? Consider what factors it has wrought. Blogging:
1. Loosened the grip of traditional players on information and news: Go back in time a decade or so, and we all got our financial news from only a handful of sources. The mainstream papers and magazines dutifully reported what companies said, government agencies reported and what markets did. Blogging has added a level of skepticism to the media diet. There is a willingness to call out nonsense that quite bluntly, deserves to be called nonsense. Not that it didn't happen before bloggers were willing to do it -- but it happens much more quickly and with more depth than pre-blogging days.
During the run up to the financial crisis, it was not the big press outlets, but rather the blogging community, that most urgently identified housing, sub-prime and derivatives as a huge problem. Much of the MSM -- the blogger acronym for Mainstream Media -- missed it
2. Created a meritocracy: The readership of a blog is a function of the quality of its author’s thought process and writing skills. You cannot “buy” your way into page views. Sure, there are search-engine optimization and clickbait and content farms, but they are obvious to most observers. Currently, there are hundreds of investing, technology, economics and stock-picking sites out there that have risen to prominence through the sheer strength of their authors' ideas (You can see my list here). The impact of so many thoughtful individuals into the grand market debate has been a net positive for all involved, with perhaps an exception being plummeting cable ratings for financial (and other) specialty television.
3. Allowed for the faster and wider spread of information (and misinformation), commentary and analysis: One of the things that blogging, combined with Google search, has done is to create a broad and deep universe of many financial topics. The phrase “little known” is harder to use these days, as nearly every data point on every topic is easily reachable. Keeping things on the down low has become much more difficult, especially for corporate shills and public relations professionals. Indeed, the way industry responds to allegations of impropriety or corporate reputation disasters has subtly changed over the years, in large part, because of the persistence of bloggers.
4. Forced accountability and humility on the financial press: The MSM initially ignored bloggers, then started ripping them off, using their work without attribution. The aforementioned Google search eventually put an embarrassing stop to that. The media started paying more attention to blog posts, eventually learning to use them to identify people who could speak to specific topics or could be quoted as experts.
Eventually, the press decided to join the fray rather than watch from the sidelines. Back in 2006, the bigger shops such as the New York Times and the Wall Street Journal joined the blogosphere. Even the site you are currently reading is now part of it.
5. Democratized the financial / economic debate: Last, the entire media universe that covers the world of investing has become democratized. At one point in time, the discussion was driven by people who went to a certain school and/or worked in certain firms (the Venn diagram of which showed a huge overlap). That era is long since over. That’s not to say that going to Harvard Business School and working at Goldman Sachs is an impediment to participating in the broad market debate -- but its much less of a requirement. Twitter, initially called a micro-blogging service, has further democratized both the debate and media.
The blahg, as it has been disdainfully described, has plenty of problems and issues. Enough that it is perhaps a topic worthy of another column. In the meanwhile, I wanted to take a moment to remind myself the significant impact that user-generated commentary has had on both finance and the media.