AmplifiedVolatility 53information flows produce fountains of high-quality information
along with a deluge of low-quality jun kmasquerading as informa-
tion. The result is increased negative information volatility that
drives a wider wedge between price and value.
In the old economy, EMT seemed plausible in part because the
information that markets digested had a superior quality compared
to that in the new economy trading environment. Old economy news
benefited from the major filtering role played by the mainstream
press. You could count on the integrity ofThe New York Times, USA
Today, The Wall Street Journal, and other great newspapers and mag-
azines to deliver news and information that was professionally vetted
under constraints imposed by long-nurtured and valuable reputa-
tions for journalistic quality and integrity.
While you still can count on such media for filtered and consid-
ered news reporting, the process of getting there has been littered
with unfiltered information that gets out before its time. The days
of getting vetted news from the morning paper and the evening news
are numbered. Americans get a steady diet of news throughout the
day, with the newspaper and the evening broadcasts sandwiching
nonstop cable news programs, Internet reports, and e-mails for-
warding rumor-based “news” that your friends or colleagues fear you
might otherwise miss.
The deluge of “news by the second” disrupts the old fixture of
the news cycle. Reporters who used to wor kon a 24-hour news cycle
that entailed gathering, researching, writing, rewriting, and printing
the news now announce their results as they go. Print journalists
broadcast tomorrow’s stories on today’s market wraps, and the re-
ports flash around every other news outlet—cable, Internet, and tra-
ditional wires.
By the time this new news cycle is finished, the news that ac-
tually gets reported in print is often either stale or discovered to be
less important than first believed. Reporting quality is sacrificed for
speed. In this world you get data earlier, but you get it the way
journalists in the middle of the old news cycle used to get it: unfil-
tered—the draft of a story in progress.
These forces were behind the $2 billion price plunge of Emu-
lex, manufacturer of fiber optic communications equipment, in Au-
gust 2000. Major news organizations, including Bloomberg, Dow
Jones, and CBS.Marketwatch.com, distributed what turned out to
be a fake press release announcing that Emulex’s CEO had resigned
and that it planned to restate its earnings for the prior two years.