Tuesday, December 2, 2008

Trading Pairs




In Financial Engineering, one of my favorite models is Pairs Trading. The idea is simple: Find two securities who move together. Identify a time at which they diverge. Make money betting the convergence that is sure to happen.

Unfortunately for me, it is never as simple as it seems. My problem with this type of model is that it requires that you largely put fundamental logic on hold and rely on patterns to represent something more than random occurrence. It forces you to do something you don't fully understand and hope for a positive outcome. We spend our lives learning how to think independently and build on fundamentals. Yet, models like this suggest that the trend trumps thinking in many cases.

Certainly, this type of behavior can be hazardous and hazardous is not a word I'd normally use to describe most brands. Yet for some reason digital advertising gives brands a shot of digital courage and they become inclined to let trend trump thinking. The allure of uncapitalized market space can lead them to a place they are not ready to go to. Such is the case with the social space. Brands find themselves chasing the tails of Zappos, Marriot, Comcast, et al while not fully aware of the burden of responsibility one must shoulder by becoming a vocal party in the social space.

Let it be known that the social space isn't always a friendly place. It isn't an empty DJ booth with scores of fans waiting on you to play your record. Rather, it's the dingy, dirty club in the darkest alley of town where everyone already has a dance partner. It's got no toilets, just buckets of ice. There are people looking to out the posers who don't belong. To survive, you have to be legit. You have to suspend your agenda. You have to be willing to say you're sorry, you're wrong, and ask what you can do to make things better.

Or, you don't have to go inside.

Brands often forget that social media involves speaking and listening. When you aren't speaking, you have the chance to learn. As a first step, I'd love to see more brands spend additional time with Search and less time with Post. Find out what people are saying about you, your industry, your environment. Find out what's important to your customers. It might pay off in the long run. You might find something to play that they want to hear.

1 comment:

Brian said...

OK OK I get the point. You didn't have to start a blog just to lecture me.