The Parable of the Shiny Object

The Parable of the Shiny Object

One day the Shiny Object was invented by a clever person. It was picked up by other clever people who noticed it was very shiny indeed. They declared that it could be the saviour of the financial market. It will end corruption, create a lower-fee environment, and have no means to be manipulated by government banks. It was amazing and extremely shiny.

It couldn’t be broken, so it didn’t ever need to be repaired. It could be bought and sold if you wanted, or even dug out of the earth with sufficient effort.

A few years passed without that many people seeing how shiny it was. Then suddenly there was a craze for it, but most of the financial world looked away, saying it wasn’t all that shiny by THEIR standards. This was deliberate. The financial people were scared of the new Shiny Object, and they hadn’t yet worked out how to make money from it, so they said it was as dull as a rusty spoon and was worthless. The Shinyrati that had got all excited went back to their basements. Then it kind of went dark for a while.

The financial world had bought itself time to think about it a bit, and decided it was no different from any of the previous shiny objects that it had made money from. Now the banks and funds finally knew exactly what to do. They would simply do what they have always done.

They invested heavily in Shiny Objects while still saying that they were useless and worthless, then they created funds and marketplaces just like they always had with every previous shiny object they had ever seen, and spread the word to their “special” clients that there was something in the Shiny Objects after all, sold them some, and told them not to tell anyone, just like a little fundraise for a new company.

It was a tried and tested pattern; it had worked pretty much every time in the past. Nothing new here…

Of course, their special clients couldn’t resist bragging about the shininess of their new investment, after all, they had to explain to their clients why they had invested in this new thing, and how the bankers are pretty shrewd so it’s likely a great idea and after all, these are pretty shiny, these Shiny Objects.

The financial world then chose to point out that there were loads of copycat shiny objects too, and all of them were amazing, and lots of them had limited supply. They announced that they were, after all, going to take an interest in Shiny Objects. There was going to be a bull run. Government-driven inflation won’t affect this. Word got around and like selling shovels in a gold rush, more and more businesses stepped in to take advantage of the new markets. They started marketing to retail customers, and reddit apes, who were having loads of fun blowing up hedge funds and were on the lookout for a new toy to send “to da moon”.


The pace of the rush made it even more attractive, just like they knew it would.

It was a tried and tested pattern; it had worked pretty much every time in the past. Nothing new here…

Times were good for Shiny Objects.

The price of Shiny Objects rose and rose, and it was time for the financial people to take some profits. They had LOADS of shiny objects, and they sold them as fast as they could into the storm of gold-diggers. Dow called this the Distribution Phase.

It was a tried and tested pattern; it had worked pretty much every time in the past. Nothing new here…

Now it was time. They had sold all their objects and the game needed resetting, so they reached into the same old playbook for the next move. They told their friends that it was all overblown like tulips in the 1630s and it could end in tears. They reminded their government friends that the object was actually very rusty and in fact could give people a nasty injury if not controlled. The news feeds turned sour and a panic ensued as some people who had borrowed to ride the Shiny Object rocket had to cut and run. The price of Shiny Objects dropped. Diamond hands stepped in and arrested the decline. Now the market was in balance.

It was a tried and tested pattern; it had worked pretty much every time in the past. Nothing new here…

The rest of the market rose and fell, each drop looked like the end of the world, each rally looked like it was “to da moon”. The prices were still too high for the financial world, so it sat on its hands. It prefers wholesale prices, thank you very much. It would tip the scales when it felt like it. Letting the whole market rally back up to make retail investors rich was simply unthinkable. Biding their time had worked in the past, no reason not to simply just sit and wait for prices to get down to a more acceptable level for them. No coincidence that the levels they were thinking about were not at all acceptable for the retail investors caught long in the trap. They would eventually give up. They always did.

It was a tried and tested pattern; it had worked pretty much every time in the past. Nothing new here…

Guess what happened next….

Clue: Dow called it the Accumulation Phase.


Quoting from the novel “Bombardiers” by Po Bronson:

“The information economy was a Ponzi scheme spiralling out of control. The investment bankers got rich slaving away, so they called in their tax accountants, who got so rich filing government forms that they called their investment bankers back for advice about where to invest their surging wealth. The investment bankers were also miserable, so they called their therapists who billed them by the hour to listen like a good friend and assure them they weren’t crazy. They worked so hard they neglected their families, so many of which ended up in divorce. They called their divorce lawyers. The lawyers worked even harder than the investment bankers and suffered physical maladies that the doctors charged them ridiculous fees to attempt to cure. The doctors, worried about being sued by the lawyers, called their insurance brokers for malpractice coverage. The engineers built computer systems that helped to speed up this cycle so they could call and bill at a faster pace. The engineers that didn’t build computers worked in the military industry at the request of the politicians, who were worried the Iranians might invade Florida. The politicians kept changing the laws so the lawyers could keep busy, and they kept changing the tax code so the accountants could keep busy, and they kept borrowing money to keep the investment money bankers busy. This was the Third Law of Information Economics at work, and it was the way of the future.”