Economic embeddedness and materiality in a financial market setting Philip Roscoe The School of Management University of St Andrews [email protected]01334 461973 Submission to The Sociological Review October 2010 Revised August 2011, December 2011, January 2012 1
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University of St Andrews - Economic embeddedness … · Web viewMy analysis pursues Muniesa’s line of questioning further. The embeddedness of social relationships in screens (Knorr
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Economic embeddedness and materiality in a financial market setting
Karl used discussion boards as sources of investment strategies to test out in the market.
Robert has often invested on the basis of a bulletin board recommendation, and others, such
as Simon and Nigel, used the boards as a source of first ideas for investment research. But
electronic interactions remain first and foremost performances, in which true actions and
intentions are not necessarily disclosed. For this reason, a minority of interviewees argued
that the boards are of little value. Stewart said that he had ‘never found any comment of any
use on a bulletin board’, while Mickey agreed: ‘I never use bulletin boards. There is generally
such a load of crap on them whenever I’ve looked at them that I never bother.’ (Stewart and
Mickey: interviews). These investors regarded bulletin boards as contentious sites, of dubious
value, characterized by individuals with particular agendas acting anonymously, for example
to ‘ramp’ stock by creating a false appearance of demand for the shares. But despite their
reservations investors found it impossible to ignore these sites. Even Stewart and Mickey
have enough experience of bulletin boards to pass judgment on their quality. Peter summed
up the non-professional’s troubled relationship with the message boards: ‘I get drawn into the
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bulletin boards, I do read them, I find them spectacularly dangerous.’ (Peter: interview)
The division of labour: devices and assemblages
Traditional notions of socio-economic embeddedness understand network relationships as
existing between human agents: Uzzi (1997) lists face-to-face interaction as one of his five
social structural antecedents of embeddedness. The bulletin boards illustrate the way in which
distinctions between social and virtual are blurred as actors interact with virtual others in an
electronic simulacrum of the market; actors on the bulletin boards were aware that electronic
Others may be other than post-social mediations of trusted colleagues. The tidy categories of
socio-economic embeddedness may be further eroded by examining a secondary
phenomenon, the expert division of labour; another of Uzzi’s (1997) preconditions for the
development of embeddedness, as economic agents seek to achieve efficiencies by
specialisation. In a materially embedded market expert labour will be divided not only
between human agents, but also between humans and devices, instruments inscribed with a
variety of performative scripts. This is the very nature of an agencement: a distribution of
agency and calculative activity. Moreover, in an investment service consumption market,
these scripts will be calibrated for the configuration and retention of customers. Thus, online
investment spaces are complemented by suites of tools offered by investment service firms,
and these tools may actively shape the market productions that investors undertake. There is a
dialectic relationship between tools and the sites that host them, with commentary and
opinion on the message boards serving educate investors in the use of tools, or to provide the
particular world view or understanding that a device needs order to function. The complex
tools of technical analysts, for example, require not only a certain proficiency in their use, but
also depend on a given understanding of market function and organisation (Roscoe and
Howorth, 2009). Both may be easily learnt through the commentary offered on bulletin
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boards. Where investment service firms offer tools for use, they will form part of the process
of customer differentiation achieved by the appropriate processing of market data: an
execution-only broker targeting small-scale investors might offer recommendations for major
shares, weekly or monthly tips, and some form of stock selection tool. Again, it is useful to
offer an example. The ‘Share Picker’, provided by one such execution only broker, produces
a short-list of suitable companies on the basis of an investor’s selection of key metrics; the
broker hopes for a clientele of long-term clients with stable portfolios, and the metrics offered
are staples of security analysis, such as dividend yield, P/E ratio, and earnings growth. Users
of the device share labour with an expert in the shape of a screening tool, configured along
the lines of the broker’s requirements and integrated with the tips, articles, and advice
provided by the broker’s own staff.
------------------------
insert figure ii about here
Figure ii. The Share Picker offered by The Share Centre [accessed 9 July 2007]. Categories
such as dividend yield and p/e ratio can be ranked in order of importance to generate a short-
list of stocks.
-------------------------
Uzzi’s (1996; 1997) analysis shows that economic agents spend much time in establishing
themselves in social relationships in order to improve costs, information, and access to
resources. An analytic perspective that stresses the material nature of embeddedness accepts
the role of virtual others, calculative devices, and others actors represented by scripts such as
newspaper articles. In this agencement, agency slips to even imaginary others: like Zaloom’s
(2003) ‘spoofer’, the spectre of the professionals’ ‘muddy footprints’ haunted one
interviewees’ account:
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‘The financial markets are actually set up to benefit the minority at the expense of the
majority, ...they are manipulated quite cynically …you can actually see their [the big
players’] muddy footprints all over the market as they trade, it’s really uncanny.’
(Chris: interview)
Here we see another kind of performance, the solitary production of the market in the
investors’ own homes as individuals dramatically create relationships with real and imagined
others (Preda, 2009). Remote, never met, even imagined others become counterparties in
long-term relationships across the financial marketplace: the materiality of screen-based
performance, analytic technology and performative text forms the basis of the embeddedness
of these market agents. From these solitary performances interviewees slowly built their own
representations of the market: Anne literally cut and pasted newsprint and magazine copy
into her scrapbook, while Robert built up his computerised database with facts and figures on
firms of interest.
At the same time, investors must interact with providers of financial services in order, for
example, to gain advice and execute trades. Providers of advice and services to non-
professionals position themselves explicitly against the monolithic financial sector. The
investment writer Tom Bulford – who Simon follows closely – promotes himself thus:
‘I love banking big stock market gains – especially if it’s on the blindside of other
investors. Seven years ago I quit my high-flying career in the Square Mile to join a
newsletter called...’ix
Operators of these services are frequently or owners of small firms who can develop social
ties with their clients. But these relationships too can be dramatised interactions with others
experienced in the form of text or screen. Simon referred to ‘my friend Mr Bulford’ (Simon:
interview) while Albert says of the designer of his analytic software:
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‘He is a wonderful man, he’s so generous and kind and clever. Amazing man, I could
follow him to the ends of the Earth.’(Albert: interview)
Unlike their professional peers, non-professionals must build their own infrastructures using
online services, tools, and meeting places. Perhaps this may account for the sustained use of
message boards, despite frequently expressed misgivings over the quality and intention of
performances made there. It appears that, in their role as the online public places of the
community, the boards were not representations of what is going on in the market. Rather, the
performances they host are the market, at least as experienced by certain groups of investors,
of whom these interviewees were one. The commercial segmentation of investing activities
locks investors into particular sites, each with its own set of language, devices and investing
folk wisdom, resulting in a proliferation of markets that reflects Law and Urry’s account of
the social sciences, where ‘different research practices might [make] multiple worlds, and
that such worlds might be equally valid, equally true, but simply unlike one another’ (Law
and Urry, 2004:397). For interviewees it appeared that the message boards performed a
similar function to the open outcry pits of pre-digital markets, as a site of performance of
prices, where social interactions, non-verbal cues, and factors such as the overall noise level
could be taken as indicators of the state of the market (Zaloom, 2006; Çalışkan, 2007). Non-
professional investors can follow market activity by watching the interactions on the
discussion boards. In place of a straightforward social embeddedness we find these investors
building relationships of trust and shared expertise with heterogeneous and often material
actors. Reciprocity and exchange emerge, even in the partnership of the advisory device and
investment service customer. Recognising that markets are embedded in material artefacts as
well as social relationships – understanding, in other words, the agencements of these non-
professionals – allows us to make sense of these relations.
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The role of the social: spectacle and self-identity
It would, however, be untrue to suppose that the non-professionals’ market is constituted
solely by solitary interactions with devices and imagined others, for investors took part in a
market that also enjoyed a rich social dimension. Interviewees visited training seminars and
exhibitions, where they met expert traders, company directors, and promoters of investing
and trading materials. They also formed investment clubs and other social groupings to
discuss investment ideas, strategies and techniques, combining the business of investment
with a pleasurable social excursion. Yet, as the nature of these venues implies, the social
interactions of non-professionals at shows, seminars and clubs does not much resemble the
long term, needs-driven socio-economic embeddedness envisaged by Granovetter (1985) and
Uzzi (1996). Instead, as the present section makes clear, the social slides into spectacle
(Debord, 1983), becoming a performance of the most overt kind. I will argue that the
concrete, physical presentations of markets fail to deliver the benefits of embedded economic
relations as set out by Uzzi’s (1997) categories. Instead, market performances appear to be
closely linked to the presentation of identity and more appropriately theorized as a
consumption activity (Harrington, 2007).
Investment shows and market spectacle
Large-scale investment shows epitomise the tension between society and spectacle in the
activities of the non-professionals interviewed. These shows appear to be a particularly
important aspect of the physical production of the markets for non-professional investors,
giving them a rare opportunity to interact with an investing world on a larger scale. The show
is part bazaar, part spectacle, and part learning experience; investors attend to browse, to
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learn, and to be part of a public performance of the financial market. It is worth analyzing one
show in more detail to illustrate this pointx. The very layout of the show underwrote its
intention as a performance. The venue, a hall in London’s Olympia, offered space for
approximately 45 stalls as well as two substantial auditoriums. It was configured in a large
‘U’ shape, with auditoriums on the left hand side (from the entrance) and the majority of
stands on the right. These stands were occupied by exhibitors, investment services companies
ranging from the stock-broking arms of major financial institutions to small independent
financial publishers and software providers. Stands were brightly coloured, illuminated, and
in many cases furnished with armchairs and sofas, where attractive, young sales-people
extracted signatures on account opening forms. In addition to the auditoriums, there was a
further open seminar area beyond the stalls, seating approximately 50 and equipped with
projector, screen and PA system. Two of the larger stands also had their own mini-seminar
areas, seating roughly 30, and similarly equipped. These were located at the corners of the
‘U’. A delegate, standing anywhere in the halls, was within aural range of one seminar at any
given time. Those stands lacking their own seminar space were likely to have a large-screen
television displaying the latest financial news. The rolling programme of seminars, backed by
Bloomberg TV or CNBC, produced a wall-to-wall carpeting of market talk. The combination
of name badges suspended on trader-style neck fobs (distributed at the entrance), the bustle,
the barrage of computer screens displaying charts and market data, the ever-present noise
from the seminars, the steady ebbs and flows of preoccupied people, all served to lend the
show an air of authenticity, something of the flavour of the genuine trading room.
Despite the exhibitors’ emphasis on sales, it was clear that investors had attended the
exhibition primarily to learn, and considered exhibitor’s stands to be of secondary importance
to the exhibition’s seminars. The seminar programme was substantial, and conference
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sessions and seminars dominated proceedings at the show. They represented a clear priority
for the attendees; on numerous occasions the attendees were unwilling to complete a
questionnaire because of an imminent seminar, or checked their watch before agreeing to do
so. Where it was possible to observe seminars in progress I saw that they were full to capacity
and often had a standing audience. There was, of course, a commercial aspect to many of
these seminars. The representatives of investment service firms extolled the virtues of
particular practices or techniques, and manufacturers of software explained how one aspect of
market function (easily detectable through their proprietary algorithm) might be harnessed to
deliver endless profits. On the other hand there was a sense, manifested particularly in the
panel debates that took place each lunchtime, that the nature of the market itself was still
open to discussion; a keynote panel that explored the merits of technical analysis as against
‘fundamental’ investing sought an understanding of market operation, seemingly considering
that operation to be malleable, one that could be contested and settled through a democratic
process of analysis and debate. In these spaces investors did more than produce a pantomime
of the market. Instead they took ownership of it, seeking to define and articulate it through
their performances. As is the case with professional investors, the market becomes seen as an
epistemic project (Knorr Cetina and Bruegger, 2000), a common object to be worked on and
defined by the community of investors.
The investor show, therefore, becomes an arena for debates over the politics of valuation and
market organisation. Yet given the size and market power of professional investors as against
the non-professionals, it is hard to see such politics being enacted. The debate becomes
instead the venue for another spectacle, the rhetorical resistance to professional finance.
Moreover, while the theory of embeddedness stresses the improved information available
through social relationships (Granovetter, 1973; Uzzi, 1996), investors still had reservations
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about the quality of information gathered at these commercially hosted investment events. As
Karl explained,
‘I like to go because you pick up some good things from fellow investors… in this
one I didn’t really pick up anything personally anyway, but sometimes although it
seems like I didn’t pick up anything now, in the future something might arise.’ (Karl:
interview)
As do the bulletin boards, investor events offer individuals an opportunity to take part in
public performances of the market, eruptions of a virtual, second-order market into the real
world; like the bulletin boards, exhibitions are noisy, overwhelming, and often of dubious
value in terms of information, and yet un-missable.
Investment clubs and self-identity
Another category of social event is the investment club. Investment clubs allow participants
to meet and talk, and have been identified as a means for individual investors to access the
capital markets (Harrington, 2007). Harrington’s characterisation of non-professional
investment as a form of consumption activity recognises the link between investment activity
and identity:
More often, it was a matter of taste, or what Bourdieu would call ‘distinction,’ as in
the case of the group that refused to buy stock in La-Z-Boy – a manufacturer of
reclining chairs and sofas associated with middle-brow American décor – because,
despite the firm’s excellent economic prospects, it came with class-linked
connotations that the investors thought would reflect poorly on them (Harrington,
2007:22).
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Investment clubs allow investors to display expertise and serious intent, exemplified by
Mickey’s dismissal of less serious clubs is operating on a ‘Here’s my fifty quid, now let’s go
and have a pint’ model. Yet is the stated intention of these sites is social, and sociality. Albert
describes formation of one such club:
‘A gentleman called [ ] who lived in Essex, had retired, had a lump sum, had been in
business and clever with money, took his lump sum and started doing a pension
scheme and was absolutely appalled how badly he was doing on the stock market,
when he thought that he was good at it because he’d been doing figures all his life. So
he wrote an open letter in the Investors Chronicle, and said: I’m retired, I’m doing
this and it’s a very lonely business and I’m very, very dismayed at how badly I’m
doing. If there are any fellow travellers out there who’d like to meet for lunch once a
month and commiserate and chat over the stock market, please write.’ (Albert:
interview)
Investment clubs fill the need for an institutional and social framing of investment activity.
Club members do develop genuine social relationships, and do divide labour, culminating in
joint problem-solving and learning. But most of all, investors talk. At Mickey’s club,
members talk:
‘About shares, individual shares, how individuals arrive at particular shares, what
trading they’ve done during the month…[or we] discuss particular sectors....one of the
guys has just done a presentation on the transport industry, he actually works in it as a
logistics adviser.’ (Mickey: interview)
George attended a club where individuals run a dummy portfolio throughout the year based
on their own investment preferences, such as high dividend yield, the ‘Zulu principle’, or
George’s favourite, small-cap technology stocks. At Albert’s club members chatted over
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anything remotely related to investing, ‘what Tate & Lyle are doing, what Morgan Sindell
has been doing, as builders what about the building sector...about politics and Gordon Brown
and taxation and the world, the Green ecology system’ (Albert: interview); while in other
venues they explore sophisticated strategies of charting and options trading. Social sites are
spaces where investors can enhance their skills and abilities, learning new things and
absorbing new information. More than this, they are a place for performance, enabling
individuals to present themselves as investors, as experts, and as participants in a market that
remains largely invisible to others.
In summary, social spaces formed an important part of the activities of these non-professional
investors. Yet their purpose was as much that of performance, spectacle and entertainment, as
it was a constituting aspect of economic relations. It seemed as if the social spaces presented
an escape from the mundane and solitary activities of the individual investor (Preda, 2009), as
much as they contribute to the quality of investment information and skills. An analysis of
this one sector of the market must be most cautious in asserting the purely instrumental and
economic value of social relationships.
Discussion
This paper has set out to consider the nature of embedded economic relations among one
group of non-professional investors in the UK. It has explored their everyday interactions
seen, for a group that trades relatively infrequently (see table 2), largely in terms of gathering
information and forging networks. I have argued that the category of material, largely
neglected in social network research (c.f. Kilduff and Brass, 2010), is vital in understanding
the embedded economic relationships of these investors. I have made use of the concept of
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agencement (Callon and Muniesa, 2005), popular in the science and technology studies
inspired literature of financial markets, to describe the complex, agency-filled networks of
device, theory, and place that surround these investors. I contribute to the literature’s
understanding of agencement by theorising these network forms in terms of the analytic
categories of embeddedness proposed by Uzzi (1997). In short, I demonstrate that material
agencements may give rise to the components and effects associated with a social analysis of
network embeddedness.
Uzzi (1997) lists five structural antecedents of embeddedness: voluntary contributions,
reciprocity, face-to-face interaction, expert division of labour, and the impossibility of exit.
Together these lead to embedded relationships epitomised by trust, better information, and
joint problem-solving arrangements. Table 3 sets out these categories and considers some of
the investors’ everyday actions which correspond to these categories. Voluntary
contributions, for example, are manifested by shared research, often posted online, and online
comments. Once it is recognised that artefacts such as scrapbooks and databases enjoy a
status equivalent to the human agents in interviewees’ production of financial markets,
solitary activities such as the compilation of investing databases can be included here.
Reciprocity is present in a generalised form in public postings and the debates of investment
shows, and more specifically in the bilateral exchanges of investment clubs, for example.
Face-to-face interaction is found in numerous categories: mediated through screen and print,
through interaction with others known electronically and in the real world; through solitary
performances and imagined others, whether the amiable Mr Bulford or the muddy footprints
of the city traders. Labour is divided among individuals – career experts offering
presentations in investment clubs – and between commentators and analytic programs.
Though not discussed explicitly in my analysis, the absence of an exit option is evident, with
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investors making long-term commitment to earn a living or manage a pension (Albert,
Mickey, Chris, terry: interviews). The table also details the components of an embedded
relationship developed: i) trust, which is generated through bilateral social relationships,
bilateral mediated relationships or materially embedded relationships (i.e. with text or
inscribed devices) ; ii) fine grained information, manifested by the detailed production of
markets in shared spaces; iii) and joint problem-solving arrangements in the form of
investment clubs, investment search networks, online debate and criticism, and the
development and sharing of more powerful kinds of investment decision making.
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Insert table 3 here
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On a broader level, the insight of Uzzi’s (1997) study – that economic pressure and the search
for improved performance among participants in a confined market arena leads to the
development of mutually helpful social relationships – can be seen to be true of the non-
professional investors interviewed. Trust, for example, a cornerstone of social embeddedness
theorising since Granovetter’s papers (1973; 1985) is manifested across agencements (in
devices, algorithms, and scripts) to a far greater degree than it appears in social relationships.
At times, the human agent is invoked as a synecdoche for the device: Albert claims to trust
his software program because he trusts its original designer, now the chief executive of a
small firm selling financial analytics. Pundits such as Jim Slater, and ‘Mr Bulford’ though
not known in person, are rich in symbolic capital (Bordieu, 2005) which becomes the basis
for use of their books and trust of their advice.
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Fligstein (1996; 2001) noted the sparse nature of social networks. The literature of market
devices also finds networks sparse; while it sets out from the shared assumption that markets
are inherently social, researchers have repeatedly argued for the inclusion of tools,
instruments and material settings within the analytical framework of social embeddedness.
The focus of these investigations has been the distributed nature of calculation (Callon &
Muniesa, 2005): ‘What counts? Tools count. Instrumentation must be brought into the
accounts of economic sociologists’ (Beunza & Stark 2004:370). For Beunza and Stark,
calculation is distributed across persons and instruments, not simply embedded in social
relations. Yet at the same time, studies of professional investors have incorporated
conservative accounts of the role of the social. MacKenzie (2004) discusses the
Granovetterian sociology of hedge fund managers; Beunza and Stark (2004:378) see the
trading room as a ‘space of sociability’, and Hardie and Mackenzie (2007) present an account
of socially-structured mechanisms of a hedge fund. Calculation stretches out of instruments,
across desks, and into social relationships. Muniesa (2008)argues that research should pay
attention to the way in which the technical features of devices shaped action in particular
ways; yet the device in question, the telephone, serves primarily to allow identification of
counterpart and the construction of interpersonal networks of trust and recognition at a
distance. As one trader says, ‘It’s good to see who does what. It’s important to be able to call
the person’ (Muniesa 2008: 9).
The present paper also sets out from the position that markets are social, and that social
relationships have much to offer market participants (Uzzi, 1997). It asks how market
participants construct sociability in the absence of institutional structures, and often in the
absence of genuine social interaction, whether direct or technologically mediated. Investing,
for many, was a lonely occupation (Nigel: interview). The non-professional investors
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examined in this paper exhibited the characteristics of a Granovetterian sociology: they
sought to stabilise economic relationships, to guarantee market information, and to build
relationships of trust. Yet the vehicles for doing so were the devices and spaces made
available to them by the Internet and by investment media. Existing studies of market devices
offers evidence of traders and analysts trusting the calculative power of their tools and
instruments (Beunza & Muniesa, 2005); in my analysis of non-professionals this trust is
developed further as devices take on the role of the social structures that surround
professional traders. In an ironic turn, the analysis has shown that face-to-face relationships
may even offer less to investors in terms of fine-grained information, shared labour, and trust;
it appears that is the value of investment shows and clubs is as primarily in their spectacle
and enjoyment value.
I offer a brief comparison with the contributions of three analysts who have pursued other
relationship-based perspectives: Baker (1984), Abolafia (1998) and Zuckerman (2004). These
contributors privilege, respectively, physical proximity, cultural norms and scripts, and
classificatory regimes. Baker’s (1984) pioneering study drew attention to the power of social
structure in facilitating market operation. Bounded rationality and opportunism, major
preoccupations for traders in the pits, could be most effectively overcome by micro-networks
offering trust and social policing; these persisted whatever the size of the crowd. Baker
determines an optimum crowd size for stable pricing, and shows in one sense that the
physical matters. Yet his analysis neglects the sheer physicality of the trading pits as
documented by Zaloom (2003:263): ‘The tone of voice, the body language of the trader, who
may be steadily and confidently holding his hands forward in engagement with the market or
yelling his bids, spittle flying and eyes wide, in desperation to get out of the trade, are crucial
inflections that traders draw on to form market judgments.’ While Baker’s account omits this
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aspect of market physicality and its impact on traders’ calculation, Zaloom has persuasively
argued that a richer account of market cognition is offered by its inclusion. Similarly, the
relative abstraction of his approach neglects the impact of trading tools and mechanisms:
trading cards and stamps are mentioned in his methodology, yet do not feature in the analysis
offered. Zaloom’s (2006) account of the evolution of Chicago’s trading rooms makes clear
the importance of acoustics, pillars and telephones in constructing a functioning market.
Abolafia’s (1998) study of ‘markets as cultures’ understands markets as held together by
regulative and normative rules and behavioural scripts. These govern the pursuit of self-
interest and stabilise everyday trading: customers’ orders must always be executed first, and
all transactions go ‘on the tape’ as soon as possible (p.71). Market efficiency and the
competitive atomisation of participants are guaranteed by a ‘caricature of the spirit of
capitalism’ (p.72). As with Baker’s study, material structures and artefacts lurk in the
background: the understanding among market-makers that all trade should be brought to a
particular spot, that orders must be placed ‘in the book’ and transactions ‘on the tape’.
Abolafia’s traders use ‘toolkits’ (p. 72 and 77) and develop routinized procedures of sorting
(p.75) , yet these comprise linguistic and behavioural scripts, rather than actual devices. For
Abolafia, as Baker, it is sufficient to abstract rules and scripts from the physical location in
which they take place. For both, social processes are considered to organise the use of
material artefacts, which appear as props in their account; a market-devices approach, on the
other hand, recognises the contribution of tools and artefacts to the development of social
routines, which arise not merely as solutions to problems but through repeated use of market
equipment.
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Baker (1984) and Abolafia (1998) study infrastructures of pre-electronic markets that are
robustly physical. A more recent contribution comes from Zuckerman’s (2004) analysis of
security pricing. Zuckerman follows Baker in his understanding that the social structure is the
network of trade underlying markets, and that it emerges via attempts to solve market
problems. He understands classificatory structures as ‘socio-cognitive processes by which
market participants make sense of stocks even in the face of severe interpretative challenges’
(p.410). For Zuckerman, these processes are part of a ‘crude functionalism’ (p.428) that
allows markets to function. An alternative approach would be to consider the impact of
analysts’ tools on these classificatory structures, viewing them as ‘socio-material-cognitive’
processes; as Muniesa (2008:309) points out, market actors are complex arrangements, and
the absence, presence and variety of material devices constitute ‘economic actors that are
different and act differently’.
My analysis pursues Muniesa’s line of questioning further. The embeddedness of social
relationships in screens (Knorr Cetina & Bruegger, 2002) and telephones (Muniesa, 2008) is
well established. In my account, technology becomes more than a mediating device for well-
known and identifiable counterparts. The relationships of non-professional investors with
electronic others, with others instantiated in text, or with analytic programs alone emphasise
the importance of material devices in relationships. As Preda (2009) shows, solitary investors
conduct negotiations with others imagined in their computer screens: what kind of
embeddedness is this? My analysis is intended to develop, rather than to dismiss, the notion
of the embeddedness of economic transactions. It is quite clear that the investors studied
valued the consequences of socially-based economic relations as identified in social network
research: stability, trust, and better information. In this paper I show that the (largely
beneficial) properties and effects of social embeddedness, as set out by Uzzi (1997) can be
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achieved by material relationships embedded into heterogeneous agencements, at times in the
absence of any social relationship – technologically mediated or otherwise. I suggest that,
while analysis of social structures remains a powerful tool for the analysis of markets, in
order to provide convincing accounts of economic embeddedness, a broader understanding of
‘social’ must be introduced; that a broadening of scope to include material categories can do
much to invigorate social network approaches.
A second implication stems from the potential for generalisation on the basis of a systematic
and plausible case study (Eisenhardt, 1989; Eisenhardt, 1991). In presenting a case relating to
one niche within a broad market of non-professional, retail or even leisure (Harrington, 2007)
investing – a group of time-rich UK investors who structure their activities around the face-
to-face meetings where they were recruited – I cannot claim that my conclusions are
representative of the entire marketplace. I suggest, however, that the effects detailed in this
paper, and corroborated by existing literature on the professional marketplace, will occur in
other sectors of the financial market as experienced by non-professional investors, and that
this assumption may form a useful basis for future research. Moreover, where consumer
facing economic markets (markets for financial products such as insurance and mortgages,
for example) are increasingly served by electronic apparatus that resembles the agencements
discussed in the paper, I would suggest that there is considerable potential for extension of
the research topic into these areas.
As such, the argument has ramifications for approaches in economic sociology that
persistently view economic relations as comprising social relationships built on face-to-face
contact, or at the least technologically mediated relations between identifiable counterparts.
Micro-level approaches using, for example, a concept of structural holes to account for
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entrepreneurial opportunity (Burt, 2005), might be more usefully served by following a
theoretical model informed by the notion of material networks and agencements (Roscoe, et
al., 2012). Macro-level theorising, wishing to take into account the claims of politics and
regulation on the embeddedness of global electronic financial markets (Sassen, 2005) may
also benefit from pursuing an analytic framework that is alive to the political, cultural, and
regulatory aspects of markets (Muniesa, et al., 2007; Çalışkan and Callon, 2009). As Latour
notes, macro-level social structures may usefully be understood as the product of a
‘summing up of interactions through various kinds of devices, inscriptions, forms and
formulae’ (Latour, 1999:17). My case study sees these concerns as inscribed in the devices
through which investors encounter the market. The heavy regulation of financial services in
the UK limits the scope and advice of products offered, and is evident in the disclaimers and
guidelines provided alongside tools and products and in promotional material. Cultural
practices may be seen in the understanding of market function, played out in debate and then
inscribed into devices; the debate of ‘technical versus fundamental’ becomes crystallised into
the choice between charting engine and Share Picker. Politics, both of resistance to
professional finance, and of the simultaneous exploitation of investors as investment service
consumers, likewise becomes enacted through the agencements of the non-professional
investors.
Politics suggests another avenue for future research: a critical (Alvesson and Deetz, 2000)
analysis of the relationship between non-professional investors and the investment service
firms. These firms have been present throughout my account, shadowy figures in the
background, yet instrumental in the production of the market for non-professionals. Carefully
distinguishing themselves from the underperforming and disliked fund managers and the
despised professional traders, these service firms provide the fundamental architecture of the
34
financial markets as encountered by non-professional investors; customers may come and go,
but the infrastructures of investor portal, investment road-show and brokerage site endure.
Academic research in finance provides much evidence that individual investors damage their
investment returns by taking unnecessary risks and trading too aggressively (Barber and
Odean, 2000; Barber, et al., 2009). Interviewees ascribed their lack of success to a lack of
discipline, or a problem with their method which further efforts would iron out; they
employed strategies of self-deception and mental accounting (Thaler, 1999) in order to
bolster their investment performance and stay in the game. Being an investor and staying in
the market requires considerable efforts in constructing and disciplining the self, a project
that may be best understood, as Harrington (2007) suggests, in terms of consumer aspiration
and self-identity (Schouten, 1991; Belk, et al., 1996). A critical, emancipatory position may
have much to offer investors as well as researchers.
In conclusion, let us reconsider the intention of this paper – to invigorate the notion of
economic embeddedness through an exploration of its material aspects. The paper has argued
that allowing the concept to include the material (understood as an agencement comprising
agency-filled, performative devices and texts) provides a rich and nuanced account of market
function that sits well in the context of global electronic financial markets. The paper has
illustrated its claims with a study of one group of stock market participants, and in doing so
has highlighted further peculiarity of material embeddedness – that the realm of physical
presentation and personal contact becomes of less value in terms of information, and more
important as a venue for political drama and the rhetorical construction of identity. The
material, on the other hand, displayed the characteristics most associated with socially-
embedded economic relations. A materially informed account of embeddedness can,
therefore, accommodate not only information, not only culture, regulation and politics but
35
also rhetoric and self-identity. By relaxing the notion that only the social matters (surely not
an overly contentious assertion in contemporary sociology) embeddedness becomes a
powerful analytic framework and one that holds much promise for future work in the
sociology of markets.
36
Table 1: Antecedents and consequences of embeddedness and network structure (adapted from Uzzi 1997)
Social Structural Antecedents
Components of an Embedded Relationship
Investor (Uzzi: firm) Level Effects
Voluntary, noncontractual contributions
Trust Haggling and monitoring costs
Reciprocity Privileged access to resourcesExchange of difficult to price resources
Face-to-face interaction Fine grained information Information processing speed and problem recognitionKnowledge of preferences and better forecasts
Expert division of labour Joint problem-solving arrangements
Learning and performance feedback
Absence of pure exit option Invention of new solutions
37
Table 2: Interviewees
Pseudonym Gender # of interviews Age Number of
trades annually
Portfolio size
Albert M 1 60 or over 40 £101k-£150k
Anne F 2 60 or over 5 £201k+
Chris M 1 50-59 Daily £151k-£200k
George M 2 40-49 * £201k+
James M 1 60 or over 12 £101k-£150k
Karl M 1 30-39 12 £51k-£100k
Max M 1 40-49 Daily £50k or less
Mickey M 2 60 or over Daily *
Mike M 1 60 or over 6 £101k-£150k
Nigel M 2 30-39 * £201k+
Peter M 1 30-39 * £101k-£150k
Robert M 2 60 or over Daily £51k-£100k
Simon M 2 40-49 20 *
Stewart M 2 60 or over 4 £201k+
Sunil M † 40-49 * *
Terry M 1 30-39 50 £50k or less
Tony M 1 40-49 Daily £151k-£200k
Trevor M 1 60 or over 2 £201k+
William M † 50-59 * *
* Not known †Interviews not recorded
38
Table 3: Antecedents and components of social embeddedness: examples
Social Structural Antecedents
Materially embeddedness in financial markets
Voluntary, non-contractual contributions:
Online comment, shared researchSolitary productions of markets: databases and scrapbooks
Reciprocity Generalized reciprocity i.e. public postings; investment club sociality
Face-to-face interaction Mediated through screen and print: interaction with others known electronically.Online market performances; real-world market performancesSolitary performances, imagined others ‘ my friend Mr Bulford’, the ‘muddy footprints’ of professionals
Expert division of labour Reliance on material expertise: commentators, analytic programsIndividual expertise (e.g. career background) shared
Absence of pure exit option Long-term commitments e.g. pension fund management, day-trading for a living, long-term contractual obligations with suppliers
Components of an embedded relationshipTrust Generated through mediated relationships (through
print, online comment). Through direct relationships: investor friends, trusted advisers and suppliersUnilateral: reliance on heterogeneous others.
Fine grained information Detailed production of markets in shared spacesJoint problem-solving arrangements
Investment clubs, investment search networks
-
39
-------------------------------------------------
Figure i: The homepage of the ADVFN portal, www.advfn.com [accessed 9 July 2007]
----------------------------------------------
40
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i The term agencement, approximately translated as ‘assemblage’, stems from studies of distributed cognition Hutchins, E., (1995), Cognition in the Wild, Cambridge, Mass.: The MIT Press., from actor network theory Latour, B., (2007), Reassembling the Social: An Introduction to Actor-Network-Theory (New Edition): Oxford University Press., and more recent work in economic anthropology Çalışkan, K. and Callon, M., (2009), ‘Economization, Part 1: Shifting Attention from the Economy Towards Processes of Economization’, Economy and Society, 38 (3): 369 - 98, Çalışkan, K. and Callon, M., (2010), ‘Economization, Part 2: A Research Programme for the Study of Markets’, Economy and Society, 39 (1): 1 - 32.. Agencement is a more useful term than its English translation as it denotes the unity of agency and arrangement.ii 86% of respondents were over 30 years of age with the modal category being 50 to 59 years. 84% of questionnaire respondents were male. Despite my best efforts, I was only able to interview one female investor, and noted that her opinions, phrases and even descriptive metaphors were very different from those of her male peers.iii www.advfn.comiv Source, www.advfn.com [http://www.advfn.com/p.php?pid=advert_op, accessed 25 October 2010]v an observer might be struck by the prevalence of ‘spread betting’ advertisements on this page. At the time that this research was carried out (2006-2007), spread betting is being aggressively promoted to investors as a tax-free means of emulating the margin trading available to professionals. Interviewees spoke in excitement of the possibilities afforded to them, although one (Uno) remarks that he had lost £5000 almost immediately on joining a spread bet cite. While research notes that the epiphenomena of gambling are evident among non-professional investors Kumar, A., (2009), ‘Who Gambles in the Stock Market?’, The Journal of Finance, 64 (4): 1889-933., my interviewees actively rejected the notion that they gambled, and the theme is not pursued in this paper. A similar rejection of gambling was encountered by Mayall Mayall, M., (2010), ‘A Feeling for Finance: Motivations for Trading on the Stock Exchange’, Emotion, Space and Society, 3 (2): 103-10. in her study of Australian non-professional investors.vi Source, www.advfn.com [http://www.advfn.com/p.php?pid=advert_op, accessed 25 October 2010]vii This author was, from 2001 to 2002, director of a company that operated investment bulletin boards. viii Beunza and Garud’s account of dot-com era stock valuations provides an ironic echo of Uzzi’s (1997) ‘paradox’ of embeddedness – that inward looking networks may suffer through ignoring important information held by outsiders.ix http://info.redhotpennyshares.co.uk/ [accessed 11 August 2011]x IX 06, held in London’s Olympia in October 2006. The researcher gained permission from the organizer to administer questionnaires and observe the exhibition.