1878, 1893, 1906, the radio had to overcome serious obstacles and technological advancement before the inaugural broadcast on August 31st 1920. While statistics cannot be confirmed with certainty, it is believed that the global population in 1927 was roughly 2 billion people. By 1923, the radio was setting sales of roughly 100,000 units per month, that number would grow to 5 million units globally by 1927. By the end of 1923 over 3 million Americans had a radio in their household.
At the time the number of radios in circulation consisted of roughly 3 percent of the total population. However that number would rise to over 10% of the population in the span of just 6 years so that by 1929 over 10 million Americans had a radio in their house. Why all these statistics? To put that into perspective, over the course of 9 years the percentage of the American population who had access to fast, reliable information went from roughly 0.0001% of the population, to 10% in less then a generation. Subsequently 1929 bore witness to the worst stock market crash in history, eroding an untold amount of wealth and development in the process.
The Dow Jones Industrial Index as referred to upon its inception in 1896, the American stock market originally had 12 companies listed on it. By 1929 the stock market had risen to a miraculous 381.71 points. Throughout the 1920's the stock market rose steadily mimicking sales of the radio. Whilst it is extremely difficult to confirm definitively, the correlation between the increase of access to information provided by the radio between 1920-1929, and the artificial rise in the value of stocks listed on the exchange cannot be underestimated when analyzing the causes of the stock market crash.
Massive portions of the American, indeed global populations were ill prepared to understand the information to which they seemingly accessed overnight. All to frequently many prospective investors are lured by the promise of "easy money" and flee for a chance at fortune. Whilst all 10 million people who potentially gained access to stock market information via the introduction of the radio did not automatically enter the stock market, it must also be remembered that the regular business practices within the financial industry also contributed to inflated market prices. Occurring in unison with this trend was the natural progression of the dissemination of information through distribution of the radio and other methods which helped promote the benefits of the stock market to members of society who were incapable of properly understanding the risks.
In essence, while many analysts promote the fact that the radio increased access to information for many people around the world and contributed to human development, it must be stressed that access to information in the hands of people who do not possess a proper foundation to process the information can, as history has demonstrated time and again, lead to disaster.
Internet Age
After the Soviet Union had beat the US in the race to space with the launch of Sputnik in 1958, the US created the Information Processing Technology Office (IPTO). The purpose was to design a land based system network of communications in order to regain the technological lead in the arms between the world's two superpowers. Since then the internet has been transformed almost monthly to evolve into its modern form.
Currently there is over 1.1 billion people around the world who use and have access to the internet. Although many of them are from the developed world, the explosion of information technology suggests that by 2020 that number could more then triple. Considering that a vast majority of internet users are supposed members of affluent, functioning democracies in the developed world, the possibility that information becomes increasingly distorted will rise exponentially as the equivalent information is shared between members of middle America and places such as Sub-Saharan Africa.
Information as King
To clarify, at present less then .001% of the global population is capable of understanding global (even personal) finance on a level that would be considered satisfactory. There can be no justification for the further dispersal of information. This lack of both personal and professional understanding of the fundamental underpinnings of finance is partly (if not fully) responsible for the current state of economic affairs. What other line of work are people allowed to enter with so very little-in some cases no- formal training? Politics? The fact remains that as larger portions of the population gain access to information, the danger for the misuse of that information increases exponentially.
For example, if you were to hand an alien a modern video game, the probability that the alien will correctly deduce what to do with it, let alone be able to effectively engage the game, without formal instructions or guidance, would be minimal. One final comparison that will hopefully shed light on the complexity of the idea that transmitting data and information to people who are unable to receive it, can be found in examples of religious extremism. Extremists supporters are almost exclusively the poor, desolate, uneducated members of third world countries. More often then not, as a result of their inability or lack of access to formal educational training, extremists are left to their own devices to interpret religious principles. As such, they are incapable of understanding (aren't we all) many abstract concepts that religious dogma incorporate into the belief system. Instead of understanding simple literary techniques such metaphors or alliteration to interpret scripture and religious writings, the messages are internalized literally. Information that is transmitted to those without the fundamental education to receive is, in a word, dangerous.
Weapons of Mass Destruction
The first demonstration of the problems associated with people accessing modern information and putting it to poor use can be seen in the causality of the .com bubble in 2000. A wave of amateur investors were lured into the market under the false premise of fast money. Quick wealth and fortune involving minimum risk. Without understanding simple market or economic forces, these investors started slowly placing bigger bets on a pre-infant industry. As a result of the technology sector's explosive growth, the industry got way ahead of itself as speculators artificially boosted the value of these technology stocks. In some cases .com companies who had less then 1 year of revenue were trading on par with companies who had been in business for years. The bubble was ready to pop. The tsunami of venture capitalists who thought they knew everything, quickly ran into the same difficulties that investors of the 1920s ran into, namely that information alone is worthless without the fundamental tools to properly process it.
Unfortunately, the explosion of internet users continued and the educational shortcomings demonstrated during the .com bubble were lost. As more and more people gained informal knowledge of the stock market and finance, too many people were once again lured into a situation they were incapable of understanding. And so, not even 10 years after the .com bubble, another market bubble was created. Instead of taking the time to understand the system, amateur investors were blinded with the promise of fast money. As everything from stocks to real estate to commodities demonstrated over average ROIs, all became over valued, knowledgeable investors knew it was time to sell.
No Where to Run
Market fundamentals had got ahead of themselves, except this time, as the exposure and access to the internet increased and dispersed non-credible knowledge to incapable wielders, the fallout crushed the entire system. Millions of people were directly affected by the stock market crash, and millions more became indirect targets of a financial system that had become impotent, left to its own devices, the market was no longer capable of governing itself.
Many amateur investors, pension and 401K contributors, speculative traders and financiers cried foul, begging governments around the world to stand up and do something. Whilst these financial institutions do bare some responsibility, they only offered a product. Had the purchaser (of which there were millions) had even minute knowledge of simple financial concepts, big banks and investment institutions would never have been able to sell 1 NINJA mortgage, 1 COD or any toxic products. The market for financial products would have changed and forced these players to develop quality products that would have large financial appeal.
Instead we, a lazy, backward, intellectually impotent society let them off the hook. Our daily desire to indulge in forms of mentally debilitating entertainment, instead of equipping ourselves with the knowledge necessary to protect and fight for our financial future is the real culprit behind the recent recession. For everyday that passed where we indulged in anything but bettering our understanding of the information that was being thrown at us, was another day we let these financial institutions monopolize information. The only reason why we find ourselves in the current economic situation is because we as a society are loosing the war of information by engaging in complacent, negligent behavior. Its a hard truth to face, but any other analysis will lead to the same conclusion.
The Moral of.....
The original argument for implementation of a stock market is simple. It was the best known device capable of resource allocation with the most effective precision. In theory, there is no better method to deliver goods from producers to users then a stock market. In the modern age, this premise is no longer the case as governments are forced, time and again, to fill a void of resource allocation that is left in the wake of market deficiencies.
The dispersion of information from both the Radio and the Internet have disturbing parallels which ended in the 1st and 2nd ranked economic disasters on record. This similarity cannot be underestimated when analyzing how to avoid similar economic downfalls in the future.
Currently there is 1.1 billion people using the internet and that number is expected to grow exponentially as the global population increases, internet technologies are upgraded, internet infrastructure expands and new people gain access to information that they too will be incapable of processing. As countries continue to develop economically, their populations will demand access to affordable telecommunications technology that will provide them with access to information in ways that we, at present, can only dream of.
It is up to the average person to take it upon themselves to become knowledgeable of the financial tools available to them and regain control of our societal preoperative to be guardians of future economic prosperity.
"Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes "
George Soros
At the time the number of radios in circulation consisted of roughly 3 percent of the total population. However that number would rise to over 10% of the population in the span of just 6 years so that by 1929 over 10 million Americans had a radio in their house. Why all these statistics? To put that into perspective, over the course of 9 years the percentage of the American population who had access to fast, reliable information went from roughly 0.0001% of the population, to 10% in less then a generation. Subsequently 1929 bore witness to the worst stock market crash in history, eroding an untold amount of wealth and development in the process.The Dow Jones Industrial Index as referred to upon its inception in 1896, the American stock market originally had 12 companies listed on it. By 1929 the stock market had risen to a miraculous 381.71 points. Throughout the 1920's the stock market rose steadily mimicking sales of the radio. Whilst it is extremely difficult to confirm definitively, the correlation between the increase of access to information provided by the radio between 1920-1929, and the artificial rise in the value of stocks listed on the exchange cannot be underestimated when analyzing the causes of the stock market crash.
Massive portions of the American, indeed global populations were ill prepared to understand the information to which they seemingly accessed overnight. All to frequently many prospective investors are lured by the promise of "easy money" and flee for a chance at fortune. Whilst all 10 million people who potentially gained access to stock market information via the introduction of the radio did not automatically enter the stock market, it must also be remembered that the regular business practices within the financial industry also contributed to inflated market prices. Occurring in unison with this trend was the natural progression of the dissemination of information through distribution of the radio and other methods which helped promote the benefits of the stock market to members of society who were incapable of properly understanding the risks.
In essence, while many analysts promote the fact that the radio increased access to information for many people around the world and contributed to human development, it must be stressed that access to information in the hands of people who do not possess a proper foundation to process the information can, as history has demonstrated time and again, lead to disaster.
Internet Age
Currently there is over 1.1 billion people around the world who use and have access to the internet. Although many of them are from the developed world, the explosion of information technology suggests that by 2020 that number could more then triple. Considering that a vast majority of internet users are supposed members of affluent, functioning democracies in the developed world, the possibility that information becomes increasingly distorted will rise exponentially as the equivalent information is shared between members of middle America and places such as Sub-Saharan Africa.
Information as King
To clarify, at present less then .001% of the global population is capable of understanding global (even personal) finance on a level that would be considered satisfactory. There can be no justification for the further dispersal of information. This lack of both personal and professional understanding of the fundamental underpinnings of finance is partly (if not fully) responsible for the current state of economic affairs. What other line of work are people allowed to enter with so very little-in some cases no- formal training? Politics? The fact remains that as larger portions of the population gain access to information, the danger for the misuse of that information increases exponentially.
For example, if you were to hand an alien a modern video game, the probability that the alien will correctly deduce what to do with it, let alone be able to effectively engage the game, without formal instructions or guidance, would be minimal. One final comparison that will hopefully shed light on the complexity of the idea that transmitting data and information to people who are unable to receive it, can be found in examples of religious extremism. Extremists supporters are almost exclusively the poor, desolate, uneducated members of third world countries. More often then not, as a result of their inability or lack of access to formal educational training, extremists are left to their own devices to interpret religious principles. As such, they are incapable of understanding (aren't we all) many abstract concepts that religious dogma incorporate into the belief system. Instead of understanding simple literary techniques such metaphors or alliteration to interpret scripture and religious writings, the messages are internalized literally. Information that is transmitted to those without the fundamental education to receive is, in a word, dangerous.
Weapons of Mass Destruction
The first demonstration of the problems associated with people accessing modern information and putting it to poor use can be seen in the causality of the .com bubble in 2000. A wave of amateur investors were lured into the market under the false premise of fast money. Quick wealth and fortune involving minimum risk. Without understanding simple market or economic forces, these investors started slowly placing bigger bets on a pre-infant industry. As a result of the technology sector's explosive growth, the industry got way ahead of itself as speculators artificially boosted the value of these technology stocks. In some cases .com companies who had less then 1 year of revenue were trading on par with companies who had been in business for years. The bubble was ready to pop. The tsunami of venture capitalists who thought they knew everything, quickly ran into the same difficulties that investors of the 1920s ran into, namely that information alone is worthless without the fundamental tools to properly process it.Unfortunately, the explosion of internet users continued and the educational shortcomings demonstrated during the .com bubble were lost. As more and more people gained informal knowledge of the stock market and finance, too many people were once again lured into a situation they were incapable of understanding. And so, not even 10 years after the .com bubble, another market bubble was created. Instead of taking the time to understand the system, amateur investors were blinded with the promise of fast money. As everything from stocks to real estate to commodities demonstrated over average ROIs, all became over valued, knowledgeable investors knew it was time to sell.
No Where to Run
Market fundamentals had got ahead of themselves, except this time, as the exposure and access to the internet increased and dispersed non-credible knowledge to incapable wielders, the fallout crushed the entire system. Millions of people were directly affected by the stock market crash, and millions more became indirect targets of a financial system that had become impotent, left to its own devices, the market was no longer capable of governing itself.
Instead we, a lazy, backward, intellectually impotent society let them off the hook. Our daily desire to indulge in forms of mentally debilitating entertainment, instead of equipping ourselves with the knowledge necessary to protect and fight for our financial future is the real culprit behind the recent recession. For everyday that passed where we indulged in anything but bettering our understanding of the information that was being thrown at us, was another day we let these financial institutions monopolize information. The only reason why we find ourselves in the current economic situation is because we as a society are loosing the war of information by engaging in complacent, negligent behavior. Its a hard truth to face, but any other analysis will lead to the same conclusion.
The Moral of.....
The original argument for implementation of a stock market is simple. It was the best known device capable of resource allocation with the most effective precision. In theory, there is no better method to deliver goods from producers to users then a stock market. In the modern age, this premise is no longer the case as governments are forced, time and again, to fill a void of resource allocation that is left in the wake of market deficiencies.
The dispersion of information from both the Radio and the Internet have disturbing parallels which ended in the 1st and 2nd ranked economic disasters on record. This similarity cannot be underestimated when analyzing how to avoid similar economic downfalls in the future.Currently there is 1.1 billion people using the internet and that number is expected to grow exponentially as the global population increases, internet technologies are upgraded, internet infrastructure expands and new people gain access to information that they too will be incapable of processing. As countries continue to develop economically, their populations will demand access to affordable telecommunications technology that will provide them with access to information in ways that we, at present, can only dream of.
It is up to the average person to take it upon themselves to become knowledgeable of the financial tools available to them and regain control of our societal preoperative to be guardians of future economic prosperity.
"Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes "
George Soros
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