Power of Information: Knowledge May Be Profitable, Only if You Get It First

502 years ago, Martin Luther nailed his 95 theses to the door of All Saints’ Church in Wittenberg. As you probably know, he got into quite a bit of trouble as a result. And eventually split a largely unified Catholic Europe into many pieces.

But there’s a particular part of Luther’s story I want to focus on. Think of it as the true story of the Reformation. It involves the unfortunately named Diet of Worms and Wartburg Castle.

The Diet of Worms was the imperial general assembly of the estates of the Holy Roman Empire. The European Parliament of its day. It was held in Worms, Germany in April 1521. Luther was ordered to appear and answer for his banned theses and other writings. The Diet decided on Luther’s fate as an outcast after he refused to recant.

On his way back from the Diet of Worms, Luther was kidnapped as planned. But not by his enemies.

Frederick the III, Elector of Saxony, was behind the plot. His horsemen put on masks and pretended to be highwaymen. Or a band of knights, depending on who is telling the story (I’m not sure you could tell the difference in Germany at the time).

The gang disguised Luther as one of them under the alias Junker Jorg. They took him to the safety of Wartburg Castle, from where Luther continued his work. He famously translated parts of the Bible into German there.

Now we get to the controversial part of my own theses. The history of the Reformation is not really about religion. At least, that is not the key to understanding what happened.

Europe’s Reformation of the 1500s was about communications technology. About the printing press. About the ability of information to spread faster than the authorities could contain.

I’ll prove it to you in a moment. But first, why should you care?

Well, it turns out that sudden and rapid change in communications technology makes things happen. Big things. The Reformation, the Arab Spring, wars, and plenty more.

But my old friend, former South Melbourne Swans teammate and former desk neighbour, Callum Newman, has a far more relevant claim for you. As Callum sees it, changes in communications technology create vast transfers of wealth too. From those who don’t know how to use them, to those who do.

The world’s most famous family dynasties were born out of changes in comms tech. We’re talking names like the Medici, Rothschilds, and the Augsburg Fuggers of Luther’s day (who had to change their name from Fucker about 600 years ago).

And we’re talking communications technology revolutions like homing pigeons and the telegraph (not The Telegraph). Although, the Murdochs…

If Callum is right, another such wealth transfer is about to begin. And he’s helping those who anticipate it, as those wealthy families did in their time.

They key is timing. As it was for Luther. And the secret weapon that gave the Reformation its speed advantage was…the printing press.

Until Luther, printing was a miserable business. Many printers had gone bust over the six decades since Gutenberg invented the press. The moment the printing industry met Luther was the moment it boomed.

Printers across Europe turned Luther into the all-time most published author in Europe. Within just five years of his theses being nailed to the church door, too. That’s how the Reformation began. It’s also what made the Reformation possible.

But what made printing so powerful?

There are plenty of obvious answers. Like the cost savings printing created. My point here is much simpler and more specific. It’s all about speed. Relative speed. They called Luther’s pamphlets Flugschriften for a reason — ‘flight-scripts’.

Luther’s success rode on the back of an invention that enabled faster communication and dissemination of information than the authorities could keep up with. This gap in speed is central to the story of the 1500s.

Luther was able to churn out many pamphlets that were printed and reprinted across central Europe before the authorities were even able to figure out what to do about him. By the time they’d decided, the German population, and especially their leaders, were in a position to dictate terms. The Reformation had passed Catholic Rome by before they even knew it was on.

In other words, by the time the church caught up, they’d lost the capability of enforcing their rulings against Luther. The speed and power of the printing press devastated the long-established power balance of the day.

Apart from the obvious reasons, the printing industry was so effective and fast in Germany because of its decentralised structure. Even when printing Luther’s pamphlets was banned in some cities, they were just printed elsewhere. The internet is the same today.

Leipzig went from being Germany’s top printing centre to a backwater of the printing world after banning Luther’s works. In Britain at the time, printing was centralised in very few places, allowing a ban on Luther’s works to be effective.

The printing press’s ability to scale up is another key factor. Printers would simply print their own versions of copies that fell into their hands. Often, the later printers’ copies were better as they had to improve the design to compete at the bookseller. But the point is, this allows exponential growth in the amount of copies available. And it is nigh impossible to censor the pamphlets effectively.

The last point I want to make about the printing press, and the way it was used by Luther, is perhaps the most important. Luther favoured short pamphlets of about eight pages, written in simple German. Think of it as blogging today.

Luther’s pamphlets broke the Catholic Church’s monopoly over much more than religion. Luther’s pamphlets destroyed the church’s political power by making priests less influential. They had been the key sources of education, news of world events, and guardians of public opinion.

But with Luther’s pamphlets in circulation, they could no longer effectively monopolise that information or power. Censoring the spread of ideas became impossible. And people discovered alternative ways of interpreting world events.

Today, the news media is being phased out in much the same way. TV stations and newspapers used to control what people knew, how they thought, and how they voted. Today, they’ve largely lost that control to the internet.

The Protestant Reformation is the prime example of how information revolutions trigger political revolutions. And the same thing has happened many times since.

All this, I was aware of. But, recently, I began to realise that the same applies to vast accumulations of wealth too. People who made a lot of money — we’re talking enough to create family dynasties — often do so by getting better information faster than their competitors. That’s how they ‘win’ consistently, especially in financial markets.

The moment I realised this was when Callum Newman told me about his idea. And now, he’s ready to share it with you.

Not that he’ll be sticking to theory at his live trading event. He plans to show you how to profit from shifts too.

Be sure to check out what he has in mind.

Until next time,

Nickolai Hubble,
Editor, The Daily Reckoning Australia

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