As the world continues to be swept by financial and market turmoil many of us are wondering who is pulling the strings behind the scene. Newspapers are generally talking about a market that is losing faith on this or that but what is it, actually, this market? There are people behind it, and corporations. There have been studies showing how the collective perception of volatility in a market actually reinforces this volatility and becomes a cause of it.
Then we blame the connected world, a world where action may be faster than our capability to grasp what is going on.
However, an interesting study is now graphically showing that the financial market is actually regulated by a small number of global companies. It is a small number but it is at the same time large enough to create behaviors difficult to predict.
The study has analyzed 43,060 transnational companies selected from a database listing 37 million companies and investors worldwide, and looked at their relationships. It turns out that a subset of these, 1,318, are actually the ones governing the whole. Each of them is connected, on average, to 20 of the others and all together they control the majority of the world’s large blue chip and manufacturing firms that in turn represent 60% of the global revenues.
Further analyses show that there is a super entity formed by just 147 companies tightly connected controlling 40% of the wealth in the network. This means that less than 1% of the companies controls over 40% of the wealth. Among them the usual suspects: Barclays Bank, JP Morgan Chanse, Goldman Sachs.
The study has been carried out, not surprisingly, by three researchers on complex systems theory working at the Swiss Federal Institute of Technology in Zurich. And they are using mathematical models applied to the study natural ecosystems to map ownership among transnational companies.
Once again we see that the natural ecosystem is being mimicked by the artificial ones we create. This is not because of an imitation intention, it is just a consequence of the presence of many actors and connectivity.