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Word Herd
July 29, 2011 - By: - In: In the News / Awards - Comments Off on Word Herd

I miss speculative bubbles. Just cuz they always end badly, doesn’t mean they aren’t fun while they last. The key of course is to get out when the getting is good. And according to Irish computer researchers Aaron Gerow and Mark Keane, the herd-speak of financial journalists is a good indicator of when to break away from the run to Head-Smashed-In Buffalo Jump. “Reputedly, John D. Rockefeller got out of stocks before the 1929 crash when a bellhop asked him for a stock tip, showing the millionaire’s canniness as to the causes of stock market bubbles, mainly that they occur when everyone is talking bout the market and has the same positive view of it.” That’s what bubbles are made of—irrational exuberance gone viral, unrealistic expectations about future earnings. Tulips anyone?

The researchers sifted through 10 million-plus words of finance reporting from the NYT, BBC and the Financial Times to discover the week to week changes in the way financial journalists write about financial news. They theorized that bubble-blinded reporters will come to an agreement as a bubble reaches its frothy head. “This agreement in language should be reflected in (i) verb-convergence, where the same verbs are used, as commentaries become uniformly positive (i.e., increasingly frequent use of a smaller set of verbs, such as ‘stocks rose again’, ‘scaled new heights’, or ‘soared’) and (ii) noun-convergence, as commentaries focus on a smaller-than-usual set of market events (e.g., increase fixation on a small number of rapidly rising stocks).”

The word analysis revealed large-scale shifts in commentators’ views in all that good news leading up to the 2007 stock bubble burst. Regardless of the individual wisdom of each pundit (deliberate oxymoron), the collective wisdom reads more like mass delusion when frequency analysis is applied to word choice. “When you look at the radical shifts towards a common, ‘”irrational’ view of the market just before the 2007 crash you see a very strong signal that something is wrong.”

My brother saw the bust coming—a fact he never fails to share when I see him. I suppose I wouldn’t mind it so much if I had taken my usual lemming-like pasting. A translator who can’t see meaning for the words. As Amanda Mayer Stinchecum, noted translator of that children’s classic, Everyone Poops, used to say (I imagine she still does, just haven’t heard it in awhile),”If I’m so smart, how come I ain’t rich?”

Maybe it’s time to get more contrarian, start with some word frequency analysis on Google labs Books Ngram Viewer, and then go in the opposite direction. Why adult diapers? Call it a business opportunity and a flogged metaphor. ‘Nuff said.

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