Information Asymmetry

I suppose that as you build from my last post on the nature of social media, you can probably pull a little more out of it. There's a bit of a phenomenon going on with regard to how everyday folks think about the economy and economic policy, and it has to do with the norms of social media and how we interpret information. There are a few pieces that work together, and I think that it's a reasonable explanation of the sudden influx of economic experts on social media sites.

The first thing is that we're inclined to be haters (like my man C-Lauff). And what I mean is that people tend to fixate on negative things. Conventional marketing wisdom suggests that negative word of mouth (WOM) is worth much more than positive WOM (they say that you need 6 pieces of good WOM to overcome a negative piece of WOM). So when we hear bad news, we tend to weight it more than good news.

The next piece that comes into play is that we're inclined to bitch and moan. We're crybabies. Think about the gossip around the water cooler. It's often very negative. And somehow, when we bitch and moan, we actually get more focused on the issue. We're geared toward tearing things down, whether it's sports, other people, or whatever. Think about what happens when your team wins a big game. The next day, the conversation looks like this.

"Dude, did you see that big game last night?"
"Yeah man, it was hot. We're going all the way, bro."
"I didn't even remember the 4th quarter, I was so hammered."
"Dude, me too!"
"Who Dat!"
"Who Dat!"
etc.

Not a whole lot of detail, just a lot of dim-witted euphoria. On the other hand, if your team loses, the conversation looks like:

"Man, I can't believe that we went into that quarters-prevent so early in the 4th?"
"I know, how does (head coach) not realize that teams that go into the prevent actually give up 1.4 more points per possession than teams that stay in their base 4-3?"
"I don't know, that's like the most fundamental stat that anyone running a defense should know. What I can't believe is the offensive playcalling on the last 2 possessions."
"I was just saying that! Everyone in the room knew that it was going to be off-tackle right on first and second down. And who in the world calls a 7-yard route on 3rd and 9? Hello?"
"And more importantly, shouldn't (head coach) know that you always go for it on 4th and 2? The average play from scrimmage gains 3.9 yards, and teams have converted 4th and 2 at a 74% rate this year."
"Actually, it's 76%, after (opposing team) converted on that last drive."
"Uggh. I can't believe that we got out played and out coached..."
etc.

All of a sudden, people have statistics, thoughts on strategy and execution, and are generally smarter when they're bitching and moaning about things. Now, that's not to say that they actually know anything about anything. But they're convinced that they do.

Now when we think about WOM, we also know that we believe that use information that comes from our friends more than we do from strangers. For example, when we see some crazy dud wearing 1700's clothing and a wig screaming about government policy, or when we see crazy people throwing blood on people wearing fur, we generally just roll our eyes.

I build all of my beliefs based on what dudes on stilts tell me.

Now, when the crazy people are our (Facebook) friends, all of a sudden, they have more credibility. I mean, these were people that we, at the very least, met at some point and decided to add to our online social network. And some of them are actual people that we have interacted with in real life, and found to be reasonable. So when they start putting things out on Facebook or Twitter, it carries a little more weight than, say these guys:

This is a wet dream for the pro-fur, pro-violence against women demographic.

But what happens is that on social media, the norm is that you only see other people chime in who agree. Typically, the interaction looks like this:

Original post: "It's time to go bang some slaves and have mulatto children out of wedlock." -Thomas Jefferson

Comment 1: "LOLZ!"
Comment 2: "I Know!!!"
Comment 3: "U R So right."
Comment 4: "I wish that I was smart enough to have found that out-of-context Thomas Jefferson quote myself."

You get a lot of back-patting, exclamation points, and txt shrthnd. And you may get some righteous indignation:

Comment 5: "Dude, that was one of our founding fathers. You should have more respect."
Comment 6: "LOLOLOLOLOL!!!"
Comment 7: "ROFLSDGIUBALMAO
Comment 8: "U R So right!"

What you don't get is much meaningful commentary. So, the original point, no matter how ridiculous is then, at best, accepted as gospel, or at worst, treated indifferently. And all of a sudden, you hit that tipping point (which is only 10%, according to researchers) things catch on, and people start seeing this sort of stuff all the time, and soon everyone believes that Thomas Jefferson was this genius poon hound who fathered a bunch of mixed-race children out of wedlock. And some random thoughts, promoted by internet shorthand written by morons, and otherwise left unchecked, are now a political movement based on the ideals of dudes in costume on stilts.

And now, people with no real training on economics, who are far from ideal in managing their own finances, but are really big into dogma, are flooding my Facebook news feed (another issue here, but I didn't get in depth with it - we only see what Facebook "thinks" is relevant to us). And not just that, they're also flooding my election season TV viewing. Not that this is a bad thing.

Bachmann is totally my new favorite GOP presidential candidate. LOLZ!!!

But I'm not exactly sure that my amusement is necessarily aligned with the greater good. But then again, what do I know? I don't even vote, unless there's a compelling reason.

-Chairman