Economy of Attention an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.
— Herbert Simon (1971)

Seeing’ is not simply a matter of looking at an internal representation of the outside world; and perception, in general, is not a passive matter of light falling on the retina and entering the visual system. Rather, it depends on an active cognitive process of categorizing and classifying various aspects of interest, and paying attention to certain things. According to Kevin O’Regan of the Inititut Paris Descartes de Neurosciences et Cognition, the structure of the brain is such that neurons at different visual processing levels compete with each other to move up to higher levels of the brain, and thus determine what we end up paying attention to. However, the potential to turn our attention to different details gives us an impression of seeing everything, providing us with the illusion of a perfect visual world. For example, when we move our eyes or shift our attention, what we are in effect doing is to access the outside world in an intermittent and selective manner. In other words, our brain is using the external world as a memory store.

Now you see me? (Image Credit:  Chris Chabris ).

Now you see me? (Image Credit: Chris Chabris).

The role of selective attention, as explained by Kia Nobre of Oxford University, is to process and integrate this neuronal competition so as to enable people to take appropriate actions. Certain areas of the brain lie at the intersection of perception and action. For example, the areas involved in moving the eyes are also used to focus attention on something even if the eyes are not moving. Empirical studies suggest that the brain has the ability to insert anticipatory biases into the stream of perceptual information. In other words, the brain constantly constructs a forward-looking model of the world as it processes the different areas of neuronal activities, extracting regularities and building predictions. Long-term memory shapes anticipatory biases, and thus people’s ability to direct their attention may be affected by habit or training.

Attention is evidently a scarce cognitive resource with a veritable neurological basis. In fact, many demonstrated cases of ‘inattentional blindness’, i.e., not seeing something that is there, or the related phenomenon of ‘change blindness’, i.e., not noticing changes in a scene, show that the human brain’s internal representation of external reality are rather sparse and sketchy. Such cognitive phenomena is the antithesis of ‘insight’, i.e., seeing what others don’t. So, with so much information in the financial markets, how do people pay attention? How do traders generate market insights? And how do we go about measuring the value of attention?

  “The closer you look, the less you'll see.” (Image Credit:  Lucas Vassallo ).  
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“The closer you look, the less you'll see.” (Image Credit: Lucas Vassallo).

Experiments by neuroscientists and psychologists focus on understanding the mechanisms of how cognitive systems cope with scarce attention. One obvious application area is the design of how financial information is visually presented. Economists, on the other hand, construct models of optimizing competition for attentional resources as a scarce commodity in order to better understand the economics of human attention. One area of economics where attention is a key factor is advertising. In any case, it seems evident that the brain will use energy as efficiently as possible, and so it appears this could be an objective function that will drive the overall optimization process, given the constraints of the brain architecture. An alternative criterion may be behavioral success, in which case energy efficiency may then be one of the constraints. It is the difference of optimizing for costs or for results. It would be interesting to examine this aspect of attentional resources from the viewpoint of ‘causal entropic forces’ as recently proposed by physicists, as there might be hidden connections between the various optimization models.

Cognitive processing is costly in terms of time and energy. So what does this mean for the organization? What is the effect of the existence of cognitive costs on an organization? How do organizations cope with information overload? Firms involve many people working together for a common purpose. People have to share information, coordinate with one another, make decisions and communicate them, all with limited amounts of time and energy. According to Kenneth Arrow, an organization can hold more information than any individual, but to do so it will need to develop special codes, and to economize on information costs through a hierarchical structure, which may be analogous to a ‘hub-and-spoke’ transport network. While greater access to diverse information can enhance productivity, information overload will reduce it. Specifically, more information will only be beneficial when the ‘gains from trade’ of information exchange outweigh the additional communications and cognitive costs of maintaining a network. This has tremendous implications for how a trading firm is to be organized, e.g., whether horizontally or vertically integrated, by taking into considerations economies of scale or scope under the constraints of cognitive processing costs at the organizational level.

It is important to realize that cognitive processing costs constrain the universe of possible outcomes for any organization design. In “Seeing What's Next,” Christensen uses the example of Dell Computer to illustrate his “Value Chain Evolution” theory's golden rule: Integrate to improve what is “not good enough” (i.e., speed, customization, and convenience of online ordering), and outsource what is “more than good enough” (i.e., architectural design of the PC). While this is certainly a helpful insight, it does not consider the cost of cognitive processing which is especially critical in a highly dynamic and uncertain environment such as that found in financial trading. For that, we will need to layer upon it a telescoping perspective based on cognitive constraints in order to avoid certain catastrophe.

A thousand ships launched on a rising tide...

A thousand ships launched on a rising tide...

... crashing into the invisible iceberg.

... crashing into the invisible iceberg.

We can thus picture three concentric rings as representing increasing scope of visibility:

  1. the scope of participation at the level of the firm;
  2. the scope of activity at the level of the value network; and
  3. the scope of vision at the level of the environment encompassing industry landscape, regulatory regime, and the macro economy.

The design of a firm then has to do with where the boundaries of the firm are drawn, how the value network is to be partitioned among the marketplace and the collaborative commons, and how to allocate scarce attention efficiently to the greater surrounding contexts of industry, regulation or macro economy. Despite all that can be automated by institutions or by machines, human attention at the highest level of a firm remains a valuable scarce resource that needs to be managed.

Seeing what's next: A telescoping view that relates vision, activity, and participation.

Seeing what's next: A telescoping view that relates vision, activity, and participation.

Economics is the science which studies human behaviour as a relationship between given ends and scarce means which have alternative uses.
— Lionel Robbins (“An Essay on the Nature and Significance of Economic Science”, 1935)


  1. Simon, Herbert A. (1971). Designing Organizations for an Information-Rich World. In: Computers, Communication, and the Public Interest (Edited: Martin Greenberger). The Johns Hopkins Press.
  2. Chabris, Christopher and Simons, Daniel (2011). The Invisible Gorilla: How Our Intuitions Deceive Us. Harmony.
  3. The Invisible Hand Meets the Invisible Gorilla: The Economics and Psychology of Scarce Attention. Summary of Conference at IDEI, Toulouse School of Economics, September 2011. Retrieved from:
  4. Christensen, Clayton M. and Anthony, Scott D. and Roth, Erik A. (2004). Seeing What's Next: Using Theories of Innovation to Predict Industry Change. Harvard Business Review Press.
  5. Nielsen, Michael (2008, December 29). The Economics of Scientific Collaboration. Retrieved from:
  6. Useem, Jeremy (2015, October). Are Bosses Necessary? The Atlantic. Retrieved from: