Separating fact from opinion is not so easy in a data democracy
• Information overload reinforces biases by encouraging internet users to read only headlines
The contribution of the winner of the 2017 Nobel prize in economics, Richard Thaler, was popularised in his book, Nudge, which postulates that simple tricks can influence behaviour.
Interest groups on social media now employ bloggers and influencers to nudge us to buy the latest thing. The act of nudging is evolving into a form of mind control, where the aim is to influence how we think and see the world.
Facebook, the social media behemoth with over 2-billion users (making it by far the largest nation on earth), recently reported better-than-expected quarterly earnings and sales up by a staggering 47%.
On the downside, it said it was hit by the rising costs of having to counteract “fake news” — a new term in the Oxford English dictionary in 2017. The problem is so bad that it is recruiting 20,000 workers dedicated to keeping fake news off its site.
In a world flooded by a data deluge, the only way to cope is to “thin slice” information by reading the headlines rather than the content. Internet users spend three times longer online using their mobile devices than their desktops, which makes it cumbersome to read long articles.
This is a trend I noticed when interviewing many young graduates, whose main source of information has become internet newsfeeds rather than newspapers or trade magazines. All this is rendering us more susceptible to manipulation.
Already many millennials have cut the cord by not watching television but spend more time on their laptops or, more likely, their cellphones. If you can get entertainment by watching user-generated productions on YouTube, why not create your own news channel by following only people who share your point of view?
We are unwittingly creating a magnified echo chamber by only listening to opinions that are similar to our own.
The Economist recently headlined its cover story “Social media’s threat to democracy” and fingered the keyboard army of regimes in the Philippines, Russia and SA that disseminate false narratives.
More recently, Jacques Pauw’s inflammatory book, The President’s Keepers, received an unexpected boost when the State Security Agency threatened to ban it. The book climbed Amazon’s global bestsellers list for Kindle books, showing in effect how difficult it is to stop the viral spread of information in a globally connected world.
In investments, I work with a group of very talented analysts to distinguish fact from fiction when analysing companies. Understanding a business and the impact of external factors allows our team to establish a business’s true worth. It is important to avoid being swayed by short-term blips that don’t affect the value of the business in the long term.
But that is easier said than done, particularly in an era of information overload, where it is easy to be distracted by whatever pops up on the screen. For instance, a recent internet survey ranked Absa as the worst bank in SA, simply because respondents believed the leaked public protector’s report saying Absa received a “Reserve Bank lifeboat” a quarter of a century ago (before many respondents were born).
As the debate rages over how machine learning and artificial intelligence will improve our lives, some experts warn of adverse consequences.
On Twitter, chatbots crowd out the debate by constantly posting propaganda.
The role of the Russians in helping Donald Trump to dominate the discourse on social media has shocked the world. Trump has 42-million followers on Twitter — twice as many as Hillary Clinton. But half of the followers are deemed fakes or bots, a Twitter audit showed.
In our research process we ensure that diverse opinions are taken into account in order to leverage off the collective wisdom of our industry experts. What matters to us are researched opinions rather than personal opinions.
Even in business news, we have seen articles released about Steinhoff International that referred to an investment it did not disclose adequately. This led to a 4% drop in the share price in one day, even though the claim was rejected by the company’s management.
In an era when short sellers can benefit from stock price declines, one can only be cynical about such headlines.
In the US, algorithmic trading programs have been caught bidding up Warren Buffett’s Berkshire Hathaway stock when they pick up any chatter around actress Anne Hathaway on the internet.
In his book Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay says there is no limit to the confusion of crowds.
The internet has democratised access to information, providing us with instant access to global news. Much richness can be derived from being exposed to a wide range of views and opinions, but can we afford to subjugate our better judgment by falling prey to a network of conspiracists?
Whether in the investment world or in our day-to-day lives, we must learn that there may be a high price to pay for blindly listening to the vox populi.