Social Finance: The New influentials

Social Finance: The New Influential's (v 1.0) 1

INTRODUCTION This research represents MindfulMoney.co.uk‟s state-of-play analysis of the most influential conversations about investments on the social web. The social network analysis was sponsored by MindfulMoney.co.uk as part of our ongoing initiative to help facilitate a more mindful and social conversation about investments by embracing new and unconventional voices, channels and views. 2

TABLE OF CONTENTS Background to the research .....................................................................................................................4 Methodology & Research Objectives.......................................................................................................5 Key findings...............................................................................................................................................6 Learning points for key audiences: IFAs, corporate, UK Govt and regulators, Media & Mindfulmoney.co.uk.................................................7 Future Phases of Research.......................................................................................................................8 The Whole Network Map ..........................................................................................................................9 How to read the map ................................................................................................................................10 The Whole Network Map: Insights............................................................................................................11 Profiles.......................................................................................................................................................13 About MindfulMoney..................................................................................................................................54 3

Background to the research The view from the UK During 2010 the findings of two influential reports In the UK the reach and influence of socially networked demonstrated unequivocally the importance of the web conversation was found to be equally pervasive with 43 per in shaping investors‘ investment decisions in the UK cent of people having bought financial services as a result of a and the US. recommendation via social networking friends. Furthermore, the UK-based study found that, amongst a range The view from the US of other products and services recommended by friends on social networks, financial services were the most trusted In the US financial websites, blogs and friends on referral, leading to the most frequent purchases with 43 per social networks were found to be the top influences on cent of referrals leading to financial services purchases individual investors, especially amongst so-called compared with clothing (26%) and car hire (25 %). ―Generation Y investors‖ with ―those under age 40 While the reports highlighted the centrality of the social web to more heavily influenced by family, friends and work investment-related influence and decision-making they colleagues than are older investors. (Harris interactive focussed mainly on friend and family networks typically with no 2010) more than 150 members. But commentators and researchers such as Malcolm Gladwell and Jakob Nielsen have argued that socially networked conversations are driven by the law of the few and all voices are not equal. MindfulMoney set out to discover if their claims were valid. Could we identify super-connected influential's who influenced the ‗local influencers‘ on the many hundreds of thousands friend and family-based networks that constitute the ―small pieces loosely joined‖ of the social web? Could Gladwell and Nielsen‘s claims be validated for investment-related conversations on the social web? 4

Methodology & Research Objectives The impetus for this research was provided by Josh Brown aka The resulting cartographic landscape was created using co-link analysis The Reformed Broker (recently dubbed by the NYT as the software, which from a starting point of 25 bloggers generated a map ‗merchant of snark‘) whose blog offers a practicing financial which includes 84 separate sites. advisors take on current market events, heavily laced with sarcasm and mordant irony. In producing this network map we were not necessarily interested in establishing a hierarchy amongst blogs (although this was one output of His periodic table of top blogs and bloggers was the starting point the research) but more in understanding their relationships with each for our attempt to begin mapping the new influential‘s in the online other, and specifically, how they relate to the mainstream media. finance space. Research objectives Josh‘s Periodic Table is witty and fascinating because it gives a clue to how he thinks but this set us thinking about how we might Do super-connecters really exist? set out to create a visual map which wasn‘t based on personal preference, no matter how fascinating and insightful such If so, what accounts for their extraordinary reach and influence? preferences happen to be. Who are they and where (geographically, professionally, psychologically) are they coming from? The purpose of this network map is to provide a visualization tool in order to better understand the relationships between financial Are the super-connectors themselves connected to one another? bloggers and the mainstream media, and to allow readers to get a sense of the online financial conversational space. Who it‘s key Are they functioning as individuals or do they constitute an executive players are and who links to whom. level social web all of their own? The UK is a leading financial centre, is it a leader in the financial conversation? 5

Key Findings The research confirms the existence of a network of investment super- In the UK the situation is reversed with UK bloggers ‗hanging off‘ connectors with extraordinary media influence and reach established media players (the Economist and FT) These super-connected new influential‘s are, for the most part, not established voices in the media but individual bloggers who fiercely UK the new influential‘s not connected to government nor to the champion their independence. mainstream media nor the city. However, these individuals operate as a connected network, influencing The collective intelligence displayed by the network has proven its one another as they debate and discuss key topics, issues and themes. anticipatory sense-making capacity and has demonstrated predictive capability in relations to the market in both the short and the long term The network has both influence (links to the mainstream media, government, thought leaders) and reach (38million) however the The network covers the issues in depth in a way that the mainstream mainstream media is not at the heart of the network where the most can‘t by drawing historical parallels and analogies to current events influential super-connectors are located. and picking apart complex cause-effect relationships. The top 20 network is international with a strong US>UK bias The network has been credited with helping investors respond more The network is heavily weighted toward the US (10% UK/90%US) mindfully to market developments than coverage by the mainstream In the US, the network functions as the unofficial voice of Wall Street & the media and trades. US federal bank with no mainstream media players at the centre of the network "Financial blogs have covered the events leading up to the credit crisis much better than mainstream media. Thanks to them, I have made good money from the crisis!" Björn A Jörgensen. Private investor 6

Learning points for key audiences Corporations INVESTORS For corporate providers of financial services following new influential‘s conversations on the social web can provide insights into how to frame Investors can usefully glean news and data from mainstream communications in such a way that they resonate with the current media coverage but following new influential‘s on the social web preoccupations and informal style of influential‘s and those that follow them can offer ‗the story behind the story‘ with more in-depth, consistent expert coverage as well as covering stories before they break in mainstream media. IFAs Some investors credit the social web with an anticipatory function For IFAs the new influential‘s offer a source of expert knowledge and an which has offered them novel investment opportunities opportunity to make new connections. Mainstream media IFAs could usefully follow the new influential‘s to tap into the social web and reverse the decreasing influence of financial advisors on the social web. For mainstream media following the new influential‘s can help to Understanding the role of new influential‘s and how information is shared supplement commentator‘s technical knowledge and offer an between friends on social networks can enable IFAs to become strategically alternative source of non-mainstream viewpoints. important to investor relations professionals. 7

Future phases of research In New Influential‘s release 1.0 we are offering a map of the territory. In What is the appropriate role of regulators to the burgeoning future releases we will be data-mining the map to shed light on single blogosphere and what role could the network play in TCF issues, creating alternative maps with different starting points and initiatives? probing deeper into some of the questions and issues brought to light by New Influential‘s 1.0 What are the risks of increasing levels of correlation (or groupthink) and contagion across social networks as ordinary Questions we will be exploring in future research releases and news investors mirror the new influential‘s? stories on the MindfulMoney.co.uk website include: Trust is migrating from established intermediaries, advisors and Why such a disparity between the UK and the US investment institutions to New influential‘s on social networks but are blogosphere? maverick voices to be trusted? Is the blogosphere a better guide to investing than the mainstream media commentators? Where are the controls, the rules, the norms in an era when everything is up for grabs? Can the investment blogosphere help to alert us to early signals of another financial crisis? If you would like to receive social finance research updates let us know. How should established institutions, ordinary investors and IFAs relate to the unofficial voice of finance? 8

HOW TO READ THE MAP WHAT ARE THE NODES ON THE NETWORK? HOW IS THE SIZE OF THE NODES IN THE NETWORK MEASURED? The map shows the top 20 blogs in the context of a wider network which The size of the nodes is drawn by the in-degree count. comprises 50 sites in total. BY WHAT MEASURE ARE THE CLUSTER MAPS GENERATED? WHAT DO THE COLOURS MEAN? Maps are generated on the basis of in-degree centrality. Blue nodes are dot.coms, green nodes are dot.orgs and red nodes are dot.govs and the links between them show relationships between WHAT’S IN-DEGREE CENTRALITY? commercial, not for profit and governmental organisations. In-degree centrality: An actor who receives many ties are characterized as prominent. The basic idea is that many actors seek to direct ties to them—and so this may be regarded as a measure of importance. 10

THE WHOLE MAP: INSIGHTS The shape of the map: central and peripheral patterns The whole map: a complex, adaptive system At the centre of the network map are the financial blogs with the Although the sites on the map can be divided into mainstream mainstream media on the periphery. media and blogosphere with ‗rankings‘ for each the map itself is best approached holistically as an interconnected online social Key insight: individuals are the New Influential’s system with diverse players where the whole is greater than the sum of its parts. It‘s notable that the core of the network are neither established media players nor established financial institutions but individuals Network functions: the role of the mainstream media or clusters of individuals. The map shows the top 84 sites. Mainstream media draw on network for source material and Profiles of the top 20 blogs with visual connectivity maps follows. include some surprises including radical voices such as the Huffington Post and Colbert Nation. Key insights: mainstream media voices Network functions: the role of the blogosphere • Huffington Post • New York Times The mainstream media provide breaking news and fact-based • Bloomberg reportage whereas the blogosphere provide the context and • FT background which is necessary to make sense of the news and of • CNBC the facts. • Colbert Nation The relationship between the two is symbiotic and generative and not oppositional and hostile as is often supposed. 11

THE WHOLE MAP: INSIGHTS A whole-systems view: no boundaries A place where dotcoms, dotorgs, dotgovs and the people converge Viewing the system-as-a-whole we can see information, The network is remarkable for its pluralism, welding together and knowledge, links and traffic moving across boundaries which are embracing not only A-list bloggers, and individuals-as-their-audience but often impassable in the offline world. corporations (.coms), government (.gov), not-for-profits (.org) and the Information crosses institutional, professional and political mainstream media in one dynamic, expansive and inclusive wide area boundaries as well as disciplinary boundaries and boundaries of conversation about economics, finance, politics and investing. geography and political affiliation. A carnival of genres The place of the UK on the network In so doing the network hosts a carnivalesque conversation which The above observation holds for the US and the network as a whole but mashes up genres such as news and reportage, blogs, satire, not for the UK where the conversation is limited to established media polemic, academic research, data visualisation and complex voices and where government agencies, mainstream media, information processing. corporations, radical media and not-for-profits are absent and disconnected from the conversation. Lessons for the offline world? The pluralism and openness of the whole network constitutes a model of participative democratic dialogue which embraces civil society institutions, the media, corporations, government and the public. 12

Profiles: The Top 20 Financial Blogs 1. Naked capitalism 11. The Market Trader 2. Infectious Greed 12. WSJ Blogs 3. The Big Picture 13. The Epicurean Dealmaker 4. Jesse‘s Cross Roads Cafe 14. Credit Writedowns 5. Zero Hedge 15. Dealbreaker 6. Mish‘s Global Economic Analysis 16. China Financial Markets 7. Calculated Risk 17. Max Keiser 8. Paul Krugman‘s Blog 18. Angry Bear 9. FT Alphaville 19. The Economist 10. Ludvig von Misses Institute 20. Jr. Deputy Accountant 13

1. NAKED CAPITALISM Profile Described by the New York Observer as „a razor- tongued chronicler‟ Yves Smith‟s blog Naked Capitalism is one of the most highly regarded and highly read financial blogs you can find. You should check out: her nonsense commentary in articles like „Why MERS need to be taken out and shot‟ 14

1. NAKED CAPITALISM Who links to Naked Capitalism MINNYANVILLE MAX KESIER FT FEDERAL RESERVE BASELINE SCENARIO MISH‘S ECONBROWSER THE EPICUREAN DEALMAKER CROSSINGWALLSTREET ZERO HEDGE 15

2. INFECTIOUS GREED Profile Written by Paul Kedrosky, who describes himself as „an investor, speaker, writer, media guy, and entrepreneur. In his spare time he is a dangerous Twitterer, columnist/contributor for Bloomberg Media (formerly for CNBC), and the editor of Infectious Greed, one of the most popular financial blogs available over the Interweb.‟ You should check out: Thought provoking articles like ‘Everything I know about how I feel about the Economy I learned on TV’ 16

2. INFECTIOUS GREED Who links to Infectious Greed MINNYANVILLE DOLLAR COLLAPSE MISH‘S THE EPICUREAN DEALMAKER CROSSINGWALLSTREET ZERO HEDGE 17

3. THE BIG PICTURE Profile When Nouriel Roubini describes you as ‗a beam of enlightened thinking in a sea of delusional complacency‘ and New York magazine calls you ‗a level headed bear with a knack for seeing through the statistical fog of economic data‘, it ‗s hard to go wrong with Barry Ritholtz‘s blog. You should check out: The entire site, but the Macro notes are great: ‗succinct summation‘s of the weeks events‘ 18

3. THE BIG PICTURE Who links to The Big Picture ECONBROWSER MINYANVILLE MISH‘S MAX KEISER THE EPICUREAN DEALMAKER DOLLARCOLLAPSE CROSSING WALL STREET 19

4. JESSE’S CAFE AMERICAIN Profile A reflective take on market coverage, with quite a lot of charts and vintage posters. An antidote to the break neck real time financial news. Check out: His daily charts. 20

4. JESSE’S CAFE AMERICAIN Who links to Jesse’s Cafe Americain ZERO HEDGE MAX KESIER (no longer links) NAKED CAPITALISM 21

5. ZERO HEDGE Profile This blog doesn’t have an ‘about’ section, it has a manifesto. So it’s no surprise that it has a strong point of view. It’s mission is to ‘ widen the scope of financial, economic and political information available to the professional investing public’. Check out: Among their highly critical articles, their forum. 22

5. ZERO HEDGE Who links to Zero Hedge MINNYANVILLE MAX KESIER FT FEDUPUS MISH‘S THE EPICUREAN DEALMAKER CROSSINGWALLSTREET 23

6. MISH’S GLOBAL ECONOMIC ANALYSIS Profile With over a million visitors a month, this is one of the most widely read economic blogs on the web. 24

6. MISH’S GLOBAL ECONOMIC ANALYSIS Who links to Mish’s Global Economic Analysis FEDUPUSA URBANDIGS MAX KEISER MINYANVILLE ECONBROWSER DOLLARCOLLAPSE ZERO HEDGE 25

7. CALCULATED RISK Profile They built a cult following as an early predictor of the US Housing Bubble. 26

7. CALCULATED RISK Who links to Calculated Risk BASELINE SCENARIO MINYANVILLE MAX KEISER 27

8. KRUGMANS BLOG Profile Nobel Prize winning economist blogs at the New York Times. This is why: ‗Many of the posts will be supplements to my regular columns; I‘ll be using this space to present the kind of information I can‘t provide on the printed page – especially charts and tables, which are crucial to the way I think about most of the issues I write about.‘(Krugman) Check out: His rows with other economists and newspapers ‗ I‘m gunna haul out the next guy who calls me ‗crude‘ and punch him in the kisser‘ 28

8. KRUGMANS BLOG Who links to Krugman’s Blog ECONBROWSER BASELINESCENARIO 29

9. FT ALPHAVILLE Profile An influential and widely read blog which has been touted for it‘s apparent predictive abilities. Here‘s why: „On average, good news on FT Alphaville is associated with 1- week ahead outperformance. Conversely, on average, bad news for a company on FT Alphaville is associated with 1- week ahead under-performance. The same effect is not evident in our database as a whole, indicating that there is something “special” about the news that comes from FT Alphaville.‟ Check out: Market Live, a daily real time discussion of the market. 30

9. FT ALPHAVILLE Who links to FT Alphaville THE EPICUREAN DEALMAKER FT CROSSINGWALLSTREET 31

10. LUDWIG VON MISES INSTITUE Profile The Ludwig von Mises Institute is the research and educational centre of classical liberalism and the Austrian School of economics. Its mission is to promote the tradition of thought represented by Ludwig von mises. The Wall Street Journal covered the institute in a piece entitled ― How did a world class think tank end up in Alabama?‖ 32

10. LUDWIG VON MISES INSTITUE Who links to Ludwig von Mises Institue MISH‘S URBANDIGS CONTRARY ADVISER DOLLARCOLLAPSE ZERO HEDGE 33

11. THE MARKET TICKER Profile The Market Ticker is written by Karl Denninger, who received the Reed Irvine Accuracy In Media Award for Grassroots Journalism for his coverage of the 2008 market meltdown. This is why one reader follows his blog: “You can go to the major financial media like CNBC.com and read an article. Then you can visit Karl‟s site and read exactly why CNBC‟s article is flawed in many ways.” 34

11. THE MARKET TICKER Who links to The Market Ticker MISH‘S MAX KEISER FEDUPUSA DOLLARCOLLAPSE ZERO HEDGE 35

12. WSJ BLOGS Profile A wide ranging selection of blogs from Wall Street Journal editors and reporters who provide real-time news and analysis around the clock, with contributions from outside experts. 36

12. WSJ BLOGS Who links to WSJ Blogs ECONBROWSER DEALBREAKER BASELINE SCENARIO THE EPICURIAN DEALMAKER URBAN DIGS 37

13. THE EPICURIAN DEALMAKER Profile Written by a New York investment banker who offers an insider ‗commentary on Wall Street, global finance, markets and their participants‘. The Epicurean Dealmaker was recently referenced in the New Yorker. 38

13. THE EPICURIAN DEALMAKER Who links to The Epicurean Dealmaker BASELINE SCENARIO CROSSINGWALLSTREET 39

14. CREDIT WRITEDOWNS Profile A news and opinion site dedicated to bringing a well- informed view of finance, economics, markets, and foreign policy into the mainstream consciousness. Contributors include Marc Chandler, former chief currency strategist for HSBC and Marshall Auerback, economic consultant to PIMCO. 40

14. CREDIT WRITEDOWNS Who links to Credit Writedowns ZEROHEDGE ECONBROWSER CROSSINGWALLSTREET 41

15. DEALBREAKER Profile DealBreaker is an online business tabloid and Wall Street gossip site that covers the personalities and culture that shape the financial industry, offering original commentary, news and entertainment. 42

15. DEALBREAKER Who links to Dealbreaker ZEROHEDGE THE EPICURIAN DEALMAKER CROSSINGWALLSTREET 43

16. CHINA FINANCIAL MARKETS Profile Written by Michael Pettis, a finance professor at Peking University‘s Guanghua School of Management. 44

16. CHINA FINANCIAL MARKETS ZEROHEDGE MISH‘S ECONBROWSER FT 45

17. MAX KEISER Profile Max Keiser is a film-maker, broadcaster and former broker and options trader. His site is heavily critical of the finance industry, with articles published in the Guardian entitled ‗Want to crash JP Morgan? Buy Silver‘. 46

17. MAX KEISER Who links to Max Keiser ZEROHEDGE 47

18. ANGRY BEAR Profile One of 24/7 Wall Street’s top 20 blogs, Angry Bear is ‗Half a dozen professionals, including a tax law expert, a historian, PhDs in economics, consultants and financial professionals provide perspectives on the financial world. Despite their expansive coverage of economic issues, their articles are as deep as their coverage is extensive. Topics include world trade, industrial production, U.S. Government programs, and major regulatory issues.‘ 48

18. ANGRY BEAR Who links to Angry Bear ZEROHEDGE BASELINESCENARIO ECONBROWSER 49

19. THE ECONOMIST Profile The Economist‘s range of 17 blogs supplements the newspapers weekly coverage , offering regular updates on politics, culture and business. 50

19. THE ECONOMIST Who links to The Economist FT BASELINESCENARIO ECONBROWSER EPICURIAN DEALMAKER 51

20. JR. DEPUTY ACCOUNTANT Profile Cited by blogs from FT Alphaville to The Reformed Broker, JDA writes predominantly about the FED. This is how she describes herself and gives you a flavour of what to expect. “I'm 29, tattooed, potty mouthed, OMG a girl! and an accidental Fed savant hiding out somewhere in San Francisco since 1999. I can't tell you why I understand what the Fed is saying 97% of the time, nor why I nerd out on Fed banks (except this one) but I do and you get to bask in it here on Jr. Deputy Accountant.” 52

20. JR. DEPUTY ACCOUNTANT Who links to Jr. Deputy Accountant BASELINESCENARIO 53

About Mindful Money What's a knowledge network? Mindful Money is a social news and knowledge network for the investment Knowledge about investing - why, how, where and when to invest - is community and it's published by the Social Business Group. currently the privilege of a few. Mindful Money's knowledge network is about sharing the knowledge and information of those in the know with What is social news? those who aren't - yet Mindful Money's social news is editorial content that mirrors the viewpoints, interests and conversations of the online investment community. We will be calling on some of the smartest minds, both inside and It's editorial that's focused more on you and your interests and the things outside the industry, to help clarify, decode and demystify the that matter to you. And less on the comings and goings of fund managers, investment scene. irrelevant product launches, banal industry awards and so on - unless of course we know they are important to you. So, in a nutshell, we're about knowledge, we're about news, we're about community and we're a bridge between the professionals and When it comes to Mindful Money, we look for new triggers for headline- every other type of investor. breaking topics, the 'story behind the story' and new frames for investment news. What's mindful about Mindful Money? Mindfulness is about making the links that others don't, paying Mindful Money also aims to help investors actually solve problems; whether attention to history and voices from outside the industry, making the that's through access to information or unconventional points of view. effort to speak in ordinary language, taking the long view, paying In that respect it's a little bit like citizen journalism, but with an investment attention to contrarian insiders and keeping an eye out for black focus. swans. So, as well as adding value to the stories and issues you're discussing We're taking a stand against fads, groupthink, short-termism, scape- wherever we can we'll provide you with resources (step-by-step guides, goating, media bias and FS jargon. A final thing about Mindful Money videos, background stories) and links to others who are covering the same - we're not about advice - there's enough of that to go around. topics. Welcome to Mindful Money. www.mindfulmoney.co.uk Mindful Money is sponsored by the following Asset Managers 54

All Work in this document remains the copyright of the Social Business Group as of 2011, publishers of MindfulMoney.co.uk Contact Details: Stewart Conway Managing Director, The Social Business Group, Centro 3, 19 Mandela Street, London NW1 0DU Email: Stewart.conway@socialbusinessgroup.com 55

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Social Finance: The New influentials

by Marco Nappolini on Jan 10, 2011

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