For the benefit
of new readers, how about a capsule definition of socionomics?
Socionomics is
the study of actions that result from changes in social mood.
What’s the hardest
thing for most newcomers to grasp?
That social mood
motivates social actions instead of the other way around.
Can you give me
an example of how this causality works?
There are millions.
Here is one. Most people think that recessions make businesspeople
cautious. Socionomics says the opposite: Cautious businesspeople make
recessions. So, the mood is the cause, and the event is the result.
Why is this insight
important? I mean, what can it do for people?
Start with the
above example. If you grasp that social mood is what moves the economy,
and you can measure mood, then you can identify when and where recessions
are most likely to occur. You can get out of the way.
And socionomics
says that you can measure mood via the stock market?
Yes. For a variety
of reasons, the stock market is an excellent meter of society’s mood.
People can act on their moods almost immediately by buying or selling
stock. But decisions they might make at the same time to expand or
contract a business, or to draft a peace treaty or mobilize for war,
take time to effect. So there is a lag. This is why the stock market
predicts the character of news, not the other way around…. I watched
the stock market confound fundamental analysts time and again. It
became even more obvious to me that news lagged prices, not the other
way around. So I became completely committed to the idea that the
market moves independently of outside events. To this day I cannot
understand stock analysts who talk about the supposed effect of elections,
the Fed, interest rates, economic news and social events. These events
have no predictive value as far as the stock market is concerned,
at least not in the way most people read the news.
What’s the best
way to read the news?
A socionomist
reads the news completely differently from everyone else. For example,
when we read that some think tank has predicted rising energy prices
for the next decade, we figure that energy prices are probably near
a top. When we read that economists are in agreement that a recession
is in force, we see it as evidence that stock prices are near a bottom.
And so on. As you can see, this is the opposite of the way most people
read the news. When news stories cluster or sound extreme, they can
have predictive value, in the opposite direction.
Why is that?
Because news
lags mood trends. By the time events have reflected a positive or
negative mood trend fully, that trend is about to reverse.
Were you a pure
socionomist from the start?
No. Socionomics
is deeply counter-intuitive. I had to go through a long process of
weeding out misconceptions from my mind that had taken root there
long ago. An early example was the idea that interest rates buffet
the stock market. There are people who make a living on this idea.
Economists are sure it’s true. My colleagues were convinced of it.
It makes sense. It’s also quite wrong. If someone told you
the course of interest rates in advance, you couldn’t predict stock
prices. The stock market moves on waves of social mood. If you know
that, you know more than the person who knows where interest rates
are going. And, of course, no one knows where interest rates are going.
Except that sometimes socionomists do know, because we study the history
of waves and their attending social attributes.
Are you also saying
that there absolutely is never a case in which an event drives the
markets?
Not quite, [but]
larger trends are completely independent of exogenous cause.
Has anyone ever
shared an “aha moment” of their own regarding socionomics with you?
Other people
have done some excellent supportive studies. Pete Kendall showed how
the sport of basketball has grown and contracted in concert with social
mood, and he has linked the outbreak of fighting in the Middle East
with worldwide social mood peaks. Working from a suggestion from Pete
Kendall, Professors John Nofsinger and Kenneth Kim demonstrated a
strong relationship between stock market trends and the timing of
when the government adds and removes regulations on investing. Mark
Galasiewski connected stock market trends to the popularity of automobile
colors; DuPont included it in its annual Automotive Color Popularity
Report, and Radar magazine wrote it up. Euan Wilson’s article showed
how prohibition was linked to the stock market. Alan Hall published
socionomic studies on the impact of social mood on epidemics and authoritarianism.
And Brian Whitmer used socionomics to predict the Greek debt crisis.
There must be three dozen such contributions ranging on diverse topics
from terrorism and eugenics to music and fashion.
Where do you see
the science heading next?
We need to test all
our ideas rigorously. We are doing so little by little. The Socionomics
Foundation offers grants to interested academics. I would like to
see departments of socionomics in universities. The demand is growing,
and some universities now include socionomics in certain classes.
So it is beginning to happen.
To learn more
about socionomics, we recommend these resources (in this order):
Socionomics
Beginners Guide
Free primer on the basics of socionomics
History's
Hidden Engine
Free 1-hour documentary
The
Socionomist
Monthly publication of the Socionomics Institute
Socionomics:
The Science of History and Social Prediction
Revolutionary two-book set
Toward
a New Science of Social Prediction: Robert Prechter at the London
School of Economics
Groundbreaking two-hour DVD