The Bots Will Work Together

An important discovery of our meme-stock-and-crypto age is that stocks go up because people buy them. It’s more of a rediscovery. But there was a long period when people thought that stocks go up for reasons like “good earnings” or “increasing present value of expected cash flows” or “increasing capacity to pay dividends.” (These reasons are commonly called “fundamental,” while “stocks go up because people buy them” is “technical,” though arguably those names should be reversed.) Going up was, in that theory, a property of the stocks, rather than of the people who bought them.

There was some descriptive truth to that theory: Often, when a company had good earnings, people would buy its stock and it would go up. But that was a rough empirical fact about investor psychology, not a law of nature. People liked to buy the stocks of companies with good earnings, so those stocks went up. But if people liked to buy different stocks, those stocks would go up instead.