Using Information Momentum To Understand Markets & Economy

For over a decade, I have used a concept that I have called Information Momentum in my thinking and discussions to explain phenomena in markets and economy that otherwise do not seem completely intuitive. Understanding why something has been different from expected in the past also helps in understanding and looking ahead to what might happen in future.

At its core, the concept is simple and parallels the similar concept in physics. Every physical object has a mass, and if it is moving, it has a velocity. The product of the two is known as momentum. The higher the momentum, the greater the impact that object will have. The higher the momentum, the higher the force required to stop the object from moving or to change its direction.

A somewhat similar concept can be applied to information. In this case, consider the number of people who receive a new piece of information, and can act on it, as equivalent to the mass, and how fast people get this new information as equivalent to velocity. The more the number of people who receive the new information, or the quicker the new information reaches people, the higher the information momentum for that information.

The concept is simple and so are some observations which help apply the concept to understanding market behavior. Somewhat in jest, and continuing the parallel with physics, I have sometimes referred to them as my laws of information momentum. Four of these observations are mentioned below.

First law of Information momentum is that the information momentum will continue to increase with time. This is obvious today. It started increasing with with internet becoming more easily available to more people, first in US and then around the world. Then, each of the following, as it came on the scene, has contributed to a quantum jump in the information momentum: advent of the web (the world wide web), email, blogs, news sites, internet trading, faster connection technologies like DSL replacing old phone dial-ups,wi-fi connections everywhere, tablets & smartphones with data connection, twitter. This trend will continue andthe increase in information momentum will magnify the impact of the other laws.

1 2 3
View single page >> |

Disclosure: None

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.