Nerds on Wall Street: Math, Machines, and Wired Markets

9.2. Pre-News and Disintermediation

The democratization and disintermediation of information is a key part of the explanation of why news is largely reflected in prices before it appears in the newspapers and their electronic outlets. People can do for themselves much of what reporters have traditionally done. News organizations feel the same kind of pressure as brokers from disintermediated customers.

People can eliminate the middlemen, and go directly to primary sources. These are the same sources used by reporters to write the "just the facts" stories that have been the mainstay of the news business. When press releases came in on the Teletype, we needed the middlemen to give us the news. We don't need these middlemen in the same way when the press releases come in on the Web. Foreign publications and specialized industry journals used to be expensive and difficult to obtain. No more. Other pre-news sources include government agencies, especially the SEC and the courts, corporate communications, purchased research reports, and data collected by specialized software agents.

9.2.1. The New Research

David Gelertner is an accomplished computer scientist who teaches at Yale, and had the misfortune of opening a package sent by the Unabomber. He is also the author of an excellent book, Mirror Worlds; or: The Day Software Puts the Universe in a Shoebox ... How It Will Happen and What It Will Mean (Oxford University Press, 1992).

What Gelertner's thesis means for investing is that ...