The Liquidity of Information

In financial markets, information often travels very quickly and can have momentous repercussions. Market volatility can lead to a extreme price fluctuations in a matter of minutes (just look at the price fluctuations in the exchange rate between “bitcoin” and the US dollar over the past week).

Some markets are very liquid, others are less liquid. Generally, the larger amount of transfers taking place in a market, the more liquid that market is.

This may also be true for markets for information — but I am not really sure. On the one hand, there are probably millions of searches on Google.com every day for something like “weather”, but my hunch is that for each of these millions of searches, weather.com is among the top results. On the other hand, at weather.com, people may not all be searching for the same string (“weather”), but my hunch is that the amount of information being transferred and the “liquidity” of this information are very high.

Another example is twitter.com: The information transferred via this website is very random and fickle — but there is a lot being transferred, and it can change direction on a dime.

In contrast, Google’s algorithms haven’t significantly changed in over a decade (their marketing department spreads propaganda messages that they are constantly changing the algorithm, but that is sort of like saying the distance of the moon from the earth is constantly changing — it is, but firstly it’s not changing very significantly and secondly the changes more or less average each other out, such that in sum there is really no significant change at all).

At present, the world-wide web seems to be made up of a few websites that constantly change a lot (i.e., they are very liquid markets for information), and also a lot of websites that change very little (they are very illiquid markets for information).

Without being able to precisely put my finger on what makes a website a liquid market for information, I predict that more and more websites will become more and more liquid — I simply have a hunch that the world is in fact moving in this direction… and also that this will make these information sources more reliable, not less reliable.

At some point, Google’s information will become about as valuable as yesterday’s newspaper.