Too Much Information: How the Internet Age Corrupts Capital Flows
The great thing about a digitally connected world where information is freely available and travels at near light speed to devices held in the palm of our hands is that it creates massive interest in stocks who are the recipients of buying interest.
The awful thing about such a digitally connected world is it makes it ten times harder for a small company to break through the wall of capital surrounding their larger competitors, and promotes monopolies.
The result is that great ideas are ignored in favour of inferior competitors who are nonetheless better established in the capital market.
Google (NASDAQ:GOOG) is the prime example.
In the Wall Street Journal article How Google Interferes With Its Search Algorithms and Changes Your Results, the authors prove conclusively Google’s statement that “We do not use human curation to collect or arrange the results on a page.” is utterly and patently false.
We at Midas Letter have documented records of Google’s policy of trying to blackmail small publishers like us into spending on advertising to increase traffic, and if our spend is deemed insufficient, a clearly manual re-ranking of our site’s appearance in search is immediate and measurable.
According to the Wall Street Journal story,
“Despite publicly denying doing so, Google keeps blacklists to remove certain sites or prevent others from surfacing in certain types of results. These moves are separate from those that block sites as required by U.S. or foreign law, such as those featuring child abuse or with copyright infringement, and from changes designed to demote spam sites, which attempt to game the system to appear higher in results.”
Google is able to direct search results exactly wherever it chooses, and does so as a matter of daily business, without repercussion or censure, because is it can out-lawyer anybody who challenges it except government.
The argument that this is their prerogative as a successful business is short-sighted, because their business is conducted over government-owned frequencies and infrastructure. They have effectively built a government-financed monopoly that precludes the allocation of capital to any business who would compete with Google.
Governments outside of the United States have successfully levied fines and imposed limitations on Google, and investigations around the world continue to probe Google’s business practices. But to what extent are these insignificant fines and unenforceable orders evidence of government collusion with these tech behemoths? Appearing to levy fines and issuer orders while illegal behaviours persist is hardly governance.
Unfortunately, thanks to Google’s search monopoly, any negative reporting on Google is suppressed by its own manually configured search algorithms. Only large established publishing enterprises who are based in the United States can create visibility around their negative reporting on Google. The Wall Street Journal’s uniformly negative coverage is only possible because the Wall Street Journal’s global audience predates Google’s monopoly on search, and so the audience doesn’t need to find WSJ stories on Google…it can find them on the newspaper’s website.
The point here is that, as an investor, there is no point in investing in any startup that proposes to build a better search engine, because that will be dead money, barring a breaking up of Google, which is a remote possibility.
Similarly, Facebook’s (NASDAQ:FB) stranglehold on social media is maintained by its first mover status, but enforced by its ability to flaunt privacy rules and policies and monetize user data in a way that some argue is illegal. But try to tell an investor that you want to raise money for a new social media platform to compete with Facebook, and you’ll be laughed out of the room.
Phenomena like TikTok and Snapchat will continue to materialize out of the subtle differences that drive successive generations of new users who, responding to a naturally rebellious predisposition, want nothing to do with the social platforms of their parents.
The overarching effect then, of too much information, has not been to level the playing field for individual investors in capital markets. Rather, it has been to concentrate power in the hands of a small number of US based businesses whose monopolies are protected by duplicitous elements of government.
Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.
Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.
Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.