OPINION In Finance, Liquidity is a property of assets, measuring how easily they can be exchanged for other assets in a market. Surprisingly, this property turns out to be very important.
Liquid assets often get traded for a much higher price than their usefulness would suggest. For example, banknotes can replace toilet paper or be used as wallpaper, however you will often see a single banknote exchanged for tens or even hundreds of meters of toilet paper. Why? Because they are supposed to be more liquid. There is an expectation that if you go to the grocery store with a banknote, there will be a wealth of useful things to exchange it for. Likewise, the owner of the grocery store accepts your banknotes just because he/she thinks they will be able to buy something useful. It turns out liquidity is founded on expectations.
A person who intends to observe some news will ask himself: If I tell my friends about this, will they appreciate it? In the past when traditional media dominated the market, the answer was pretty straight forward — they will appreciate it if it comes from an established news source with good reputation. Nowadays there are millions of blogs, radio- and TV-broadcasters delivering news on the Internet. Will your friends appreciate it if you tell them that blog so-and-so wrote this-and-that? Do they still appreciate news from traditional sources?
If you can account for the background and authors of the blog you are citing, it will probably be appreciated if it sounds credible. If not, people will just like in the past, prefer established media.
One of the assets that used to be among the most liquid in 20th century trading was the dollar of the United States (USD). As a consequence, the central bank that issues the currency in question has been able to issue lots of it. The financial meaning of massive issuing of currency is that the country, USA, got an enormous loan that they will, realistically, never pay back. The United States have used this loan to, among other things, increase private consumption and produce weapons.
Is there a similarity in the media market? Yup!
Established media earn a lot of money, while most blogs don’t. This money is sometimes distributed to shareholders and sometimes used to expand someone’s political power. Sometimes the ability of a newspaper or TV-station to influence people’s opinions and perceptions is doubted based on the idea that individual journalists may disagree with the will of their superiors and write or shoot something else. If you think so, you are a so called optimist. We get a glimpse of the amount of control a hierarchy can keep of journalists in an article in the magazine Journalisten, where Johannes Nesser interviews former employees of Sweden’s largest morning newspaper DN.
It’s in Swedish but let’s translate some parts.
In early October, the eleven remaining in the project group “DN 150 years” gather in a 400 squaremeter office room, behind a metal door in the block Paradiset on northern Kungsholmen. […]
They are removed from all redactional mail-groups, their logins to the journalistic software are withdrawn, they are deprived of access to the redactional system and they get no assignments for two weeks.
Now, this may have been about downsizing rather than about control. However notice these details:
In November 2013, they get a new manager who propose the group should come up with a draft for how DN would call attention to its 150th anniversary. […] A few weeks pass. One of the managers visits and tell them there is another project group working with the 150th anniversary in the DN-building. That group is named “DN 150 years” too. It’s that group’s draft that was instated.
And a quote from one of the former employees:
Where were our colleagues? Are they scared mice? I know no other newspaper office that would shut up if something like this happens.
Not only in media and currencies do we see this pattern. If everybody turn to the same clergy/academy for answers to the big questions in life, the answers will gradually become more and more corrupt until they in effect mean: Be our slave and it will turn out well for you.
The main instrument of control is the fear of becoming irrelevant and having to confess to yourself that the work you put so much of your emotions into was in vain. Now, think long and hard! Is somebody doing this to you right now?
In order to break the vicious cycle of the liquid becoming more liquid and the illiquid becoming more illiquid, a nice strategy is diversification.
Instead of going to a few large newspapers and broadcasters for news, you try to find the ones that few others have discovered.
Instead of trying to be friends with the popular person at a gathering that everybody else want to be friends with, you call the lonely person who didn’t even show up.