A Glimpse At The "Most Potent Force In The Social World"

Tyler Durden's picture

By Ben Hunt of Epsilon Theory

Well, Dick, it's got a good beat and you can dance to it.

      -  standard response to Dick Clark's "how do you rate this song" question

Dancing is a vertical expression of a horizontal desire.

      -  Robert Frost

I know nothing, except what everyone knows - if there when Grace dances, I should dance.

      -  W.H. Auden

Those who dance are considered insane by those who cannot hear the music.

      -  George Carlin, stealing a line from Friedrich Nietzsche

As long as the music is playing, you've got to get up and dance. We're still dancing.

      -  Chuck Prince, former Citigroup CEO, summer of 2007, before the Deluge

I don't set trends. I just find out what they are and exploit them.

      - Dick Clark

American Bandstand

In 1949, Yale anthropologist George Murdock spearheaded the establishment of an inter-university research organization to continue his life's work: the cataloguing of what he called cultural universals, the social behaviors that exist in every human society across time and geography. That institution — the Human Relations Area Files (HRAF) — is still going strong today, supporting all sorts of social science research by providing a fully-indexed electronic collection of cultural anthropological studies. The goal is to find patterns or commonalities in human social behavior, and it all stems from Murdock's List: his compilation of the 67 universal social behaviors of the human animal. Every now and then someone publishes an updated version of Murdock's List (either directly, like Donald Brown in his 1991 book, "Human Universals", or indirectly, like Steven Pinker in his 2002 book "The Blank Slate"), but it's hard to improve on the original. It's a fascinating list, with items such as "propitiation of supernatural beings", "eschatology", and "kinship nomenclature" right alongside "joking", "hair styles", and "mealtimes". Pretty much everything we do in life is instantly recognizable as an item on Murdock's List, and what isn't just needs a little tweak in perception to fit one category or another.

I like looking at human behaviors through the lens of Murdock's list for the same reason I like looking through the lens of evolutionary theory: behaviors that seem illogical or just plain stupid through our standard lenses of small-I liberalism or modern economic theory take on a new appearance with a change in perspective. In "Adaptive Investing"  I discussed how non-economic behaviors such as routine mammograms and daily multivitamins (and portfolio risk scenario tests) make sense from an evolutionary perspective as a behavioral adaptation to demonstrate fitness, much like the dance of the Blue-Footed Booby or the ceremonial fight of the Oryx Gazelle, but they also make sense from a Murdock's List perspective as a "propitiation of supernatural beings", where we attempt to appease the great modern god Cancer (or in the case of risk scenario tests, the great ancient god Luck) with a ritualized sacrifice of our time and money.

One of Murdock's 67 cultural universals is dancing. You find dance in every human society that ever existed (more so than music), and it will exist in every human society in the future. Why? Because it is part of our eusocial nature, part of the 10% bee-ness than makes up the human animal. Like the bee, we dance both to communicate and as a hard-wired response to signals from fellow members of our species. It's not a language that we hear or generate in the same way that we speak English, but it has a grammar and a vocabulary nonetheless. Because it so primal, dance has an urgency that modern spoken languages do not, and I say that as an individual to whom dancing is very much a foreign language.

Interestingly enough, mathematics is not on Murdock's List. Mathematics is an entirely formal language, about as far away in human terms as one can get from the language of dance (and yes, there have been efforts to create formal linguistic representations of dance, none of which have caught on). The unfortunate fact is that it's very hard to represent human social behaviors in formal linguistic terms. That's true whether the social behavior occurs in an artistic or cultural setting, like dancing, or whether it occurs in a market setting, like the "dancing" that Chuck Prince was referring to in 2007 when Citi was still underwriting and securitizing Alt-A and sub-prime mortgages as fast as humanly possible. But just because it's really hard to describe a group dynamic like dancing with the same symbols that describe a capital asset pricing model doesn't mean that dancing (or "dancing") lacks a language and a grammar. You just need to develop an ear for it, and that's where game theory can help.

Game theory is a bridge between hot-blooded social languages like dancing and cold-blooded formal languages like mathematics. Game theory is an abstraction of dynamic social interactions. Because it's an abstraction, game theory usefully adopts some of the formal grammar of mathematics, which remains the most efficient way to represent theory regardless of what the theory is about. But game theory has no meaning or usefulness outside of a social setting. Like the tango, game theory takes two. Also like the tango, game theory is all about movement, the fluid movement of separate individuals who are bound up with each other in a system of mutual expectations and individual goals. Put it all together and game theory uses some basic mathematical concepts to organize our thinking about dynamic and strategic behaviors that have their origins in our social animal brains and Murdock's List. It's a powerful tool kit.

Some people have an intuitive ability to "speak" game theory fluently. These are geniuses like Dick Clark who can translate between the language of the social animal and the language of the self-aware brain effortlessly, and make an enormous fortune in the process. Clark recognized the trends, nuances, and idioms of popular culture just as surely as he recognized the economic formulas behind radio and television syndication. Was he a brilliant artist? Nope. Couldn't dance, sing, or act. But he spoke the language of performers and somehow figured out how to communicate that primal grammar to Middle America in a way that felt "safe". It seems weird today, as we are immersed in a popular culture of youth, but "youth culture" (a phrase coined by Paul Anka in reference to Dick Clark) didn't exist before American Bandstand. As much as anyone over the past 50 years, from the Beatles to Elvis Presley to any performer you want to name ... Dick Clark was responsible for the modern landscape of how the languages of music and dance are communicated in a commercially lucrative fashion. His secret (other than a bizarrely youthful face)? Clark understood the Common  Knowledge Game.

Clark didn't poll America to determine their taste in music. He told them their taste in music ... not directly, but by creating common knowledge — ideas that a crowd believes that the crowd believes. With the American Bandstand group dance staging and scripted questions, Clark allowed the TV audience to see a crowd of attractive young people act as if the music were popular. This is all it takes. Clark didn't have to force his preferred choice of popular culture on his audience like some centrally-planned Ministry of Culture. The TV audience chose it all on their own, thinking all along it was their choice! This is the power of the Emperor's New Clothes. This is the power of the sitcom laugh track and the live studio audience. This is the power of public coronations and executions. This is the power of Tahrir Square and Tiananmen Square. This is the power of the crowd seeing the crowd, and it is the most potent force in the social world.

It's certainly the most potent force in the social world of markets, and every Central Banker today is playing the Common Knowledge Game just as hard as Dick Clark ever did.

Here's last Thursday's (Jan. 9) WSJ headline teaser at 9 am ET after the ECB press conference:

European Central Bank President Mario Draghi used unexpectedly strong language to stress that the central bank will remain accommodative for as long as necessary.

How is this the Common Knowledge Game? Since August 2012 we have watched the markets dance to Draghi's tune. If you don't know by now that Draghi's words move the market crowd, then you're an idiot. But you're not an idiot. And neither is any one of the hundreds of thousands of people reading the WSJ headline. And neither is Draghi. We are told by the WSJ that Draghi's words today have a good beat and you can dance to it. So we do. We dance, just like we've been trained to do by watching this show 30 times before.

As a result, Italy and Spain's equity and credit markets outperformed Germany's by a mile after Draghi's signal ... which was exactly the intended effect (Spain is now borrowing money at the cheapest rate in the euro era!) and exactly why it is so difficult to be a macro Value investor today. All of your fundamental indicators that show (correctly) that Italy and Spain are ridiculously overvalued at current prices relative to, say, Germany don't matter in the least. Or rather, they matter, but they evaporate like dew when the Draghi sun shines at a press conference. Note to Jeremy Grantham: it costs Draghi nothing to use "unexpectedly strong language" to keep this game going for a loonnng time.

Here's last Friday's (Jan. 10) WSJ headline teaser at 9 am ET after the disappointing jobs report: "Weak jobs report complicates Fed plans." Seems innocuous enough, right? Nope, this is a market roiler, especially for the most sensitive assets to the Narrative of Central Bank Omnipotence ... assets like gold.

Gold rocked last Friday, on deflationary news. Huh? I know that gold bugs will tell you how great gold can be in a deflationary environment, but come on, that only makes sense if you're talking about end-of-the-world deflation. The jobs report last Friday was run-of-the-mill, plain vanilla disappointing growth news. Not end-of-the-world news, not even negative growth news ... just disappointing growth news. This should be bad for gold prices, not good, and Friday's price action made no sense through the lens of traditional economic theory. But it made perfect sense through the lenses of history and game theory, where the meaning of gold has shifted from an alternative store of value to  insurance against Central Bank policy error.

Of course, this sort of challenge to the Narrative of Central Bank Omnipotence could not go unaddressed, and sure enough by 7 pm last Friday you had a WSJ article by none other than Jon Hilsenrath, the Common Knowledge spokesman for the Fed, titled "Fed Unlikely to Alter Course After Jobs Report." Over the weekend and on Monday you had at least three Fed Governors come out with similar statements, that there was no confusion or complication imposed by the jobs report. Nothing to see here folks, move along. None of these Powers That Be are taking issue with whether or not the Friday jobs report was bad news ... the only thing that matters is how this news impacts the common knowledge structure that generates their power to control market outcomes. That's the threat that must be squelched. This is what Bernanke meant when he talked about using communications as a policy tool, and this is what Yellen (and Draghi and Abe and everyone else in the club) will continue to do ... use public statements to play the Common Knowledge Game and drive market outcomes by proxy.

I can sleep well at night if you get nothing else out of Epsilon Theory beyond the recognition that a) you are being played, and b) there are rules and logic to how you are being played. But I'd also like to demonstrate that c) it's entirely rational to play along (to a point), and d) you can be a player, too.

It can be entirely rational to act as if the Emperor is wearing a beautiful set of clothes. In fact, when you're caught in a Common Knowledge Game others will look at you askance if you act publicly according to the evidence of your own eyes rather than the evidence of the crowd watching the crowd. But you need to recognize that's what you're doing. It's critically important to avoid internalizing your behavior, falling into what Kant called a "dogmatic slumber", believing in your heart of hearts that the Emperor truly looks marvelous. The tragedy of 1984 is not that Big Brother rules Oceania, but that in the end, Winston loves Big Brother and gives himself over to collective solipsism. The fright of Invasion of the Body Snatchers is not the cat-and-mouse with alien pod people, but that in the end, Donald Sutherland becomes a pod person and outs the human survivors.

Other than the minor detail of losing your free will, why is it so important to avoid becoming a pod person? Why is it a bad idea solely from the perspective of being an effective investor? Because the tango is an unpredictable dance. Because your best move in ANY game is not pre-ordained or even fully under your control. Your best move depends not only on Know Thyself, advice that Socrates gave almost 3,000 years ago and is still the smartest, deepest thing that anyone has ever said, but also on Watch the Other, the sensitivity that all social animals possess to look for and pick up on minute changes in the signals that our hive-mates emit.

The moment you give yourself over to the Dick Clarks of the world who create common knowledge, the moment you abdicate your keenly evolved human abilities of self-awareness and other-evaluation ... that's the moment you put yourself at the most risk. Because the game will change. Even if the external conditions of the world today are exactly the same as the external conditions of the world yesterday, a change in the internal conditions of the other game-players, whether it's a queen bee like Draghi or a set of worker bees like us, can change your best move.

This is the insight that game theory provides, an insight that econometrics (which only looks at external conditions) can't — how social dynamics and group interactions impact market behaviors. Game theory predicts that gold prices will go up on ANY news — even deflationary news — IF that news creates a worker bee perception that the queen bees are rattled by the news. And vice versa, gold will go down on ANY news — even inflationary news — IF that news improves the perception that global central banks are large and in charge ... the Narrative of Central Bank Omnipotence. It's not the news itself, which is what an econometric perspective would say, but how that news impacts the belief structures that comprise the game. It's not the card that's dealt (the news), but how that card fits the hand that your poker opponent is representing. An ace of spades is good news for your opponent in the abstract, but it might be terrible news if he's representing a heart flush. Game theory is all about playing the player, not the cards. That's not a replacement for understanding the fundamentals and the math of drawing this card or that, but it sure is a complementary skill set. If you want to win.

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Harbanger's picture

Conditioned like lab rats.

HelluvaEngineer's picture

I see the JPM interns are online tonight.

0b1knob's picture

So much astroturf, beards, and merkins around.

Boris Alatovkrap's picture

Sure, da, maybe crowd is watch crowd for cue, but nothing is move sheeple with great efficiency like fear. Maybe Dick Clark is get tiny bopper to dance for new song phenomena, but Pol Pot is get lovely Cambodian children kill parent. Which is more powerful?

Boxed Merlot's picture

move sheeple with great efficiency like fear...Pol Pot is get lovely Cambodian children kill parent. Which is more powerful?...



Great point.  Fear motivates, and the fear of death, pain, suffering and loss as coercive inducements rely on those who haven't yet made peace with themselves / their creator, i.e., typically the young.  I would contend however, the power of a surrendered soldier, a free and voluntarily compliant citizen and / or "salvation" assured individual will trump the Pol Pots of the world.



Boris Alatovkrap's picture

In USA* government is fear people, in USSR, people is fear government.

"When people is fear government, is tyranny, when government is fear people, is freedom." - Thomas S Jefferson

* Where is USA, only see USSA now.... :(

mofreedom's picture

Are greenies (ups) being turned into reddies on this site tonight?

mofreedom's picture

I've never seen such a blood bath here, though I may have and don't remember, but I have all my faculties tonight!

NoDebt's picture

Yeah, the down-arrow boys are out tonight.  All threads, all comments.  Good thing I learned from the BLS to disregard negative data.  Fuck 'em.

Freddie's picture

Using TV and Hollywood plus music.

Odd how the U.S. rock music and hippie culture were created by "kids" of the MIC/Intel/founding families.  More Operation Mockingbird.


Most of these kids went to schools in VA near DC and the intel apparatus.  The whole hippie movement was to give the youth some idea they had a voice while MIC and the elites made billions off Vietnam.

rwe2late's picture



Neither the counter-culture hippies and yippies, anti-war radicalism, civil rights movement, feminists, nor rock music were

"created" by a government conspiracy, or originated as a government/ ruling-elite plot.

Instead, they originated in response to the inequities. oppressions, and lies of wars, racism, and materialism.

What is correct to argue is that  individuals were co-opted, arrested, and even murdered; that organizations were infiltrated by (FBI-police) agents, and systematically marginalized and misdirected by established media and government policy.

A comparison may be made to the suppression of the IWW, and the substitution of cooperative fragmented trade unionism.

The false conspiracy theory of resistance you allege,

begets the rejection of genuine resistance with a false and mocking cynicism.


Dave Thomas's picture


Hey Freddie, it's pretty spooky isn't it? Check out this story called Inside the LC, it's about all the folks in Laurel Canyon during the sixties who died mysteriously and all had strange links to the MIC. Makes your head spin!


Dave McGowan took the story off his website since he's publishing a book, but you can read all parts here:




Rwe2late, check out the parts about Jim Morrison, he supposedly wrote all of those songs in a very short time with no interest or training in music. Kinda odd.



Dave Thomas's picture

Hey Freddie, It's not nice to change what you've said to match the thing brother. I see what you did there.


prains's picture

Herd mentality is what the NFL, NBA, MLB is for.......go team, (because some dudes have been rented to play in my hometown for this year), go!

blindman's picture

if lab rats did scientific studies they would
use people because of the same similarities.

fonzannoon's picture

This is the new Dick Clark. He does a pretty good number on Davos and the 85 richest people and how the journalists cover it...fwiw (Mountain Few)


Harbanger's picture

-1 for looking to Jon Stewart for ANY answer.  I'm not judging you, hell no. It's part of the subliminal conditioning we've all been subjected to.

fonzannoon's picture

it's all good, as i said below I expected it. I am not looking to him for any answers. What is interesting to me is he is ZH for the 40 and below crowd. Maybe even older, and both parties. Massive audience. He is witty and no dummy. 

He is the kind of celebrity that I expect will eventually set the plate for the 3rd party candidate when everyone is sick of the two parties in 2 years. Of course that underdog 3rd party candidate will just be another version of what we already have, and probably much worse...but with his blessing the sheep will pile over themselves to be able to say they railed against the system and showed their rebellious side. People are stupid.

Harbanger's picture

He's a script reading mouthpiece for the establishment left, if you think he's speaking honestly, you're still asleep.  He's fake, the laughs are fake, the audience is fake, he's more fake than the modern reality TV shows.  Everything from the MSM was design to mislead and condition the lab rats.  That's the point of the article.  Stewart no more "politically incorrect" than that other PC schmuck Bill Maher who did the "politically incorrect" show.

fonzannoon's picture

when did I say he is speaking honestly? I said he is smart and funny. I never said honest. The audience is real. I've been to a show. They fuckin love him. They adore him. THEY think he is real.

He is not just a mouthpiece for the left. The right watches him too, and he takes his shots here and there at our dear leader. 

If we can agree that when you get high enough on the ladder there is only one team, then he is the script reader for that team. That is what makes him so useful and so dangerous. I think you understimate his influence, no offense, if you lump him in with that douche Mahar.

( you know these are not my down arrows)

Harbanger's picture

Folks like you are the reason why I'm prepared for the worse case scenario in the US, which is full blown controls and totalitarian rule, it's almost inevitable at this point.  You're a smart guy, you went to college, you have degrees, you offer clients financial advice, yet you can't tell who's who. 

fonzannoon's picture

Do you actually think there are actually two parties?


Harbanger's picture

I don't give a fuck about any parties.  What do you believe in, who are you?  Do you even know who you're listening to? It's becoming very clear to me that we are fucked.  We don't even know the difference.  So what are you even fighting for?  Hope it's not to save your own sorry ass cause that ain't happening.

fonzannoon's picture

Harbanger, with all due respect, take a step back, because you have this competely misunderstood. 

I don't give a fuck about any parties. I don't distinguish left from right. It's too late anyway. The whole thing is fucked. This was an article on Dick Clark and how he shaped people's minds, remember? All I was asserting here is that this one particular dude carries A LOT of weight with the asshole fucking sheeple. He will be instrumental in helping whoever was meant to be next, get in. I don't "listen" to him. I don't believe he is "honest". I am saying he is one hell of an evil motherfucker because he knows his role and is good at it. I live in the NYC area. So I did go to a show to see if it was real. He did not cast a spell on me. I can actually watch and see something without being brainwashed.

Why you needed to mix in insults while putting words in my mouth and incorrectly judging me is a bit puzzling. 


Harbanger's picture

OK, enough said.  I'm not judging you, I'm making a point about what we've become.  No point in continuing.

fonzannoon's picture

I hear you man. When you say what "we" have become I doubt you include yourself. I don't include myself.

fwiw as to what I am fighting for, and believe in. It's all about my kid now. Nothing else matters. Nothing. 

Son of Captain Nemo's picture

To Harbanger and Fonz

I believe the last time I watched the Dailyshow with Jon Stewart not too long ago I might add he had Blackwater's Erik Prince on his show to "Tell his side of the story"...

Needless to say your exchange here highlights his motivations and foretells quite well the direction this Country is continuing to head in...


The one I actually thought had the biggest opportunity to be the noble leader of the "sheep" was Stephen Colbert after what he did to G.W. at the Press Correspondents Dinner in 2006. After I saw him tear Bush and Cheney a "new one" I said this guy was on the way to being another 'pied piper' in the genre of Bill Hicks. 

8 years later....  Boy was I and many others who believed how NOT Jon Stewart he was were wrong!

blindman's picture

but your kids will live amongst other people's kids
in an environment or place, somehow, somewhere, so
it seems the point is or the suggestion might include
enlivening the dick clark inside ourselves so as to have some
editorial input, if nothing else,
for the "children's" future? sadly, this comment is
reminiscent of two cheesy political slogans of the last
30 years, "a thousand points of light" ghwb and "it takes a village". hc
and a song by jimmy cliff.
Jimmy Cliff "Children's Bread" Guitar Center Sessions on DIRECTV


WillyGroper's picture

>>>>>It's becoming very clear to me that we are fucked.

WTF took you so long?

WillyGroper's picture

Never heard you take a pot shot at the Tyler/s when they've linked him. 

Christ, do you take everything so serious? You're making the assumption that nobody can discern entertainment from reality. 

Freddie's picture

Jonathan Stewart Leibowitz is just another Mockingbird puppet.  TV and Hollywood is for idiots Fonz.  

fonzannoon's picture

This country is run by idiots voted in by idiots. Judging by the junks it seems many of them have found there way here.

Freddie's picture

Fonz - you are a nice guy but no one gets on TV or the wide open media like big radio unless they say what the elites want said.  Stew-Rat is an illusion to make you think there is a guy out there who sort of has your back.  He is just another puppet.  The whole hippie music movement in So California was an op. 

Why did these people spend so much on mind control and LSD?

Why is your leader using neuro linguistic programming when he talks to the sheep?

Programmed zombie killers like Sirhan, Hinckley, the zoned out kid in CO who was doing neurology research along with his dad.   Adam Lanza who no one saw for the past 4 years and the parents were connected.

It is not run by idiots.  It is run by ruthless killers.

Boxed Merlot's picture

It is run by ruthless killers...



Hillary 2016 preview and the fate that has befallen so many Clinton associates!


As for all their "associates" and other adults working in security, etc., I understand it's an inherent vocational risk, but the deaths that continue to haunt me are the 2 young boys on the train tracks.

"Mena is a federal issue".  -  B. Clinton



fonzannoon's picture

 "Stew-Rat is an illusion to make you think there is a guy out there who sort of has your back.  He is just another puppet."


come on man....Jeebus age Christ Freddie....like I don't know this? No offense but does anyone read anything anymore or do they just go straight neanderthal nowadays? Jon Stewart bad! fonz clueless!



malek's picture

Maybe you should double-check what you write.

He is not just a mouthpiece for the left. The right watches him too, and he takes his shots here and there at our dear leader.

Are you even aware you now sound like one out of the adore-him studio crowd?

fonzannoon's picture

how do you figure? What about that says I adore him? Did I happen to write anything else, I don't know...such as  "I am saying he is one hell of an evil motherfucker because he knows his role and is good at it".

Are you even aware that your conclusion makes you seem like a retarded neandertal? 

malek's picture

Full context:

Harbanger: He's a script reading mouthpiece for the establishment left, if you think he's speaking honestly, you're still asleep.

fonannoon: He is not just a mouthpiece for the left. The right watches him too, and he takes his shots here and there at our dear leader.

H attacks JS.
You reply with: But some righties like him too, and he even sometimes takes shots at lefty figureheads!


"Then teach me how to see!" "No one can teach you how to see!!"

Oh I forgot, it's always someone else's fault, except on ZH unless it is.

Freddie's picture

Fonz - the only person in the media that I have seen with real balls was Judge Andrew Napolitano.  I don't watch TV but I heard he was taken off Fox News and TV.   Gerald Celente is another but he can only get on RT. Some people also may mention Alex Jones but I don't trust him totally.  TV is joke. 

Hollywood's scripts are all Obama and the alphabet intel agencies that make SWAT teams, DHS thugs, spying on the public, shredding The Constitution all high tech and cool now.

The first two minutes here show why Judge Napolitano is no longer on TV.  He got way to close to exposing the truth.


All the best to you.

fonzannoon's picture

I liked him (Judge) a lot Freddie, and they sure yanked him fast enough when he got going.

But my post had nothing to do with anyone in the media having balls or exposing the truth.

I am not saying Stewart has balls, or that he is the real deal. I think it's hysterical how fast so many people jumped jumped to the assumption that I either liked him or believed in him because I linked something to him. Unfortunately, unlike Napolitano etc. this guy has a MASSIVE audience. But there I go kissing his ass again because I pointed out something like that.

I mean Freddie, in all honesty...how retarded has this place become? Like I need a fuckin lecture from people on here about who Stewart is and what he does from people who see a link and start foaming at mouth before they understand the context I put it in.

Anyway, all the best to you as well man. Thanks for not taking any offense.

Ned Zeppelin's picture

Bullshit. Although I agree the media in general is completely complicit with TPTB anyone can see Stewart is at least trying to provide social commentary through humor. Maybe he is just a "permitted outlet" but at least he talks the talk.

blindman's picture

the warning is beware the gate keeper,
the one permitted to speak limited truth
to appear to the enamored public as an
honest broker but then, when ordered or persuaded,
to sell the "big" lie. it appears to be a special
function and status in the information industries.
"honest broker" turned gate keeper, everywhere in
academia, entertainment etc .......

MeMongo's picture

Kind of like Jim Cramer! After watching most of those ass clowns I find myself yearning for the days of Wally George:-)

WillyGroper's picture

Pahleeese, it's called comedy.