I’ve been skeptical about social media’s ability to do “good” in the world since Day 1.
So I find it interesting, now some 13 years after the launch of Facebook, that many industry veterans are questioning its contributions to society, too.
Facebook’s former VP of user growth, Chamath Palihapitiya, has been quite critical, saying recently:
“[There is] no civil discourse, no cooperation; [rather] misinformation, mistruth. And it’s not an American problem – this is not about Russian ads. This is a global problem.”
Facebook’s first president, Sean Parker, has also sounded the alarm, saying top-dog social media companies have succeeded in “exploiting a vulnerability in human psychology.”
It can’t be argued: social media does give everyday folks more access to people and information.
But as I’ve said before, more isn’t always better.
For one, there’s plenty of evidence to show that most people simply can’t process all the information we’re bombarded with on a daily basis. We get paralyzed by sheer volume, and so we come up with “short-cuts” aimed at finding the proverbial “signal in the noise.”
One of those short-cuts is well-known (but nearly impossible to combat) confirmation bias.
Basically, human nature leads us to do two dangerous things in the information world:
- We preferentially seek out information that confirms the beliefs we already hold, and
- We preferentially believe information that confirms the beliefs we already hold.
Perhaps that’s the psychological vulnerability Sean Parker was referring to…?
Is that the mental glitch that allowed those Russian ads to go viral during last year’s election?
Regardless, social media can be dangerous – for everyday folks and investors, alike.
Of course, so can the “old-fashioned” 24/7 news channels.
In Want to Really Make America Great Again? Stop Reading the News, Ryan Holiday opened up about the agony he felt from his gluttonous consumption of news (mostly political in nature, given the extraordinary presidential election).
Two key points stood out to me…
First, he described the mechanism by which information overload has now become the norm. In his words:
In the 1990s, political scientists coined something called the CNN Effect. The basic premise was that a world of 24-hour media coverage would have considerable impact on foreign and domestic policy. When world leaders, generals, and politicians watch their actions – and the actions of their counterparts – dissected, analyzed and speculated about in real time, the argument goes, it changes what they do and how they do it… much for the worse. [emphasis added]
Think about that! Around-the-clock access to news – and dissections and analyses of that news – is thought to affect the decision-making process of world leaders.
That’s pretty scary if you ask me!
What’s more, the CNN Effect leads to another problem for ordinary people. Mr. Holiday further explains the “narcotizing dysfunction,” which simply means “paralysis by analysis.”
He says, “… the narcotizing dysfunction attempts to explain why highly informed citizens are often surprisingly inactive politically. The answer is that they confuse reading, thinking about chatting about issues (i.e. “consuming”) with doing something about them.”
The idea of “paralysis by analysis,” and the overconsumption of information, is two-fold.
For one, the simple act of analyzing an issue, or problem, gives people the feeling that they’ve done something to address the issue or problem – even if they’ve done nothing more than lie in bed with their iPad and read about it.
Second, having access to more information is not the same thing as knowing the best thing to do with that information. In fact, in many instances, having more information can make decisions and actions more difficult.
We either can’t find the signal in the noise… or we’re exposed to so many viewpoints that we simply revert to our previously-held view (thanks to confirmation bias).
Mind you, the article I’m referencing speaks to the political arena. But the very same influences affect your investment decisions and actions as well.
Longtime readers know I routinely warn against reading too much news.
I’ve talked about how Warren Buffett’s greatest strength is discipline, not genius – and how he, and other successful money managers, maintain discipline to their strategies, largely by ignoring the news.
I’ve also likened my relationship with the 24/7 news cycle to the temptation motorists feel to “gawk” at car accidents on the interstate. I’ve said, “I glance [at the news]… only because it takes too much effort to fight the urge. But then I quickly turn my focus back to the road ahead.”
And I don’t even have a Facebook account!
You see, I’m not telling you to stop reading the news (or perusing Facebook) completely. That’d be a little extreme.
But I am warning you that there is such a thing as too much information. And since the 24/7 news outlets and social media networks are incentivized to get users and clicks and sell advertising, it’s easier than ever to get too much bad information, too, these days.
At the end of the day, I know you’re still going to read the news and checkout your Facebook feed.
But do yourself a favor: limit your consumption, take most of it with a grain of salt and don’t look to CNBC or Facebook for your next “hot” investment recommendation.
Research offers a number of data-driven (and news-ignoring) investment strategies, including my own Cycle 9 Alert and 10X Profits. Both of these strategies will keep your focus on actionable investment opportunities (and off the news cycle and Facebook feed).
To good profits,
Editor, 10x Profits