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This academic debunking of XBRL shows that we are now in the slough of despond and great productivity will soon ensue. April 5, 2013

Posted by Bernard Lunn in Uncategorized.
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http://www8.gsb.columbia.edu/ceasa/newsn/2252

Hell, what do I know, I am just an entrepreneur and investor and this study is from a leading business school no less but….if you enjoy amateur hour rants read on.

Here is my theory.

1. The stock market today is driven by High Frequency Trading (HFT) and Central Bank Intervention (CBI). Fundamental analysis – the sort of thing that XBRL enables – is irrelevant in this world.

2. This too shall pass. HFT plus CBI is no way to run a real market. When everybody sensible (read, the herd) ignores fundamental investing, you can be sure that a few contrarian investors will be making fortunes with fundamental investing (spotting good companies at low prices, you know the silly way that Warren Buffet wastes his time). Those overlooked gems are likely to be small caps, lost and lonely in small cap hell. When news of these investing dudes surfaces in mainstream media, lots of people will rush to join the action. They will need some tools, which will have to be XBRL based.

3. XBRL is deeply disruptive to “the way we do things around here” on Wall Street. By Wall Street I also mean the conventional academic researchers at the “leading” business schools. XBRL democratizes financial analysis in the same way that PCs democratized computing and social media democratized HTML. When you can compare the cash holdings across 100 companies with a single entry in your spreadsheet, or see quarter to quarter revenue growth for every company in the index that you devised, do you need mega brokers and their me too reports churned out by freshly minted MBA graduates in an outsourcing center somewhere?

So, expect a lot more negative stories about XBRL. Ignore them. Unless the lobbyists manage to overturn the XBRL Mandate; if that happens NYSE and NASDAQ will die as trading shifts to Asia and London.

I think XBRL is nearing the bottom of the slough of despond in Yossi Vardis great “picture tells a thousand blog posts on innovation”. That means great stuff ahead for XBRL. 2013 should be year XBRL goes mainstream, but as I tend to underestimate the power of inertia, it will probably happen more in 2014.

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