Socionomics & The Wave Principal

One of my favorite parts about blogging is that thousands of people way smarter than me read my blog and give me feedback. Recently I was sent a couple links about socionomics and the wave principal.

Information markets influenced by a wide array of marketing techniques and publishing formats are likely also bound by the same sort of wave principals that guide economic markets.

The general trend (online or off) goes something like this...Politicians, corporations, and other powerful institutions abuse language, cook the books, and game rating and ranking systems until eventually the fraud can be held no longer. The bottom falls out of a near perfect market. Then the market gets new guidelines and regulations, which start getting gamed before they are even drafted.

The online world largely reflects the offline world, with a bias toward the edges (as smaller markets can be served online, we are more inclined to follow things that reinforce our worldview, and most modern measures of relevancy are aligned with things that easily associated with signs of bias). Here are some examples of how wave theory applies to search, publishing, and monetization.

  • Companies and individuals aggressively optimize conversion rates until one day that form of optimization goes so far that some consider it fraud, as reported by a guy who was flamed in the last Internet bubble.

  • Every effective marketing method spreads, gets abused, dies down, then is reformatted and reused again under another name, but touches the same emotional triggers.
  • Each new social network is easy to game. After early adopters are ingrained in the hierarchy, the story spreads about how easy it is to game, then the ROI is marginal at best for the latecomers.
  • All the new social networks spread out consumer interest, so now Google is investing into trying to pull it back together.
  • Google trusts links so people buy them. Google starts filtering some obvious bought links and tries to manipulate public perception when they find that they can't do it well enough to put a dent in the link buying market.
  • Most new sites are spammy. Google trusts old sites so people buy them. etc.
  • You publish news of how successful a site is. Either Google tries to kill it or dozens of people clone it.
  • Auto-generated content is getting more sophisticated and trusted sites are pumping out garbage content to monetize their authority, so Google requires more link equity to keep your content indexed.

Measuring relevancy and manipulating it are both forward looking and reactive processes. As is creating a self-funding brand in a fast changing market dominated by misinformation and information pollution.

[Update: Great follow up post at Squareoak.]

Published: August 19, 2007 by Aaron Wall in business


Kostya Teterin
August 20, 2007 - 2:43am

Sorry for writting here, but I didn't found how to contact you directly.

I am just wondering when was the last update of SEO book. I can't find this information on the website.

August 20, 2007 - 6:04pm

The same thing happens all the time in financial markets and products as well. I wish I could remember where I heard this, but the point was that once a financial product has been broken down to the level that you can buy into it in $5,000 increments, there is basically no money left to be made with that product.

Interesting post!

August 20, 2007 - 9:16pm

While it's true that markets and trends come in waves, beware Elliot Wave theory itself. It doesn't work reliably for trading, and is in no way scientific - if by scientific we mean a hypothesis that can be empirically tested. Prechter, the guy who's behind Socionomics and the like, got his predictions about the stock market so wrong over the past few years (he did have some success in the 80's) that flipping a coin would give better results.

Brendan Picha
August 20, 2007 - 11:01pm

Aaron this is great! I love pairing found theory with the search marketing industry. I sent your post over to an economist friend of mine and her response turned into an interview which I posted on my site. Have a look. Interesting stuff!



August 20, 2007 - 11:46pm

Great interview Brendan. I added a link to it in the post :)

Brendan Picha
August 21, 2007 - 12:50am

Gracias! In the link...could you represent "Square Oak" as Squareoak? One word. Just a branding consistency thing. Thanks again!

Paris Roussos
August 21, 2007 - 1:28am

Hi Aaron,

There is a book called "Dictionary of Theories - One stop to more than 5,000 theories" that I think you would enjoy.


August 22, 2007 - 5:38pm

When I think of a system at peak gaming I think of Enron's house of cards. Once this house of cards collapsed, Washington answered with regulations to include Sarbanes-Oxley. To avoid (game) the scrutiny of public traded companies, private equity movement comes in an buys companies into private non-transparent house of cards?
Thanks for the post!

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