I recently watched an excellent documentary on Netflix called “The Social Dilemma”. It is a wonderful explanation of how the big social media companies work and a behind the scenes look through interviews with ex-employees of Facebook, Google, Instagram, Twitter and the like. It is incredible how these companies have built massively scaled businesses in part by using psychology to draw people ever deeper onto their platforms.
A few things stuck with me after watching the documentary, but I will highlight two. The first is that (as one interviewee put it) we are the product being sold. The main revenue line for most of these companies consist of advertising revenue. The only way for them to sell these advertisements are by keeping us on their platforms for as long as possible. With clever algorithms and AI, they predict and push onto us that which they calculate will keep us glued to our screens. It seems that our primal brain is wired in such a way that it enjoys constant “surprises” (what will I see next) as well as positive reinforcement (this agrees with what I’m thinking or makes me feel good). The interaction isn’t that different to a gambler constantly pushing the button on a slot machine. The notion that I am the product being sold has made me reflect again how much time I spend on social media and what benefit I am really deriving. Do I want to be “sold?”
The second thing that stuck with me is that each person’s social media feed is unique with interesting consequences. It is curated to reinforce your existing beliefs and help you find like-minded people. This results in increasing groupthink, with the group you are identifying with being “right” and other groups “wrong”. We have seen this in increased polarisation in democracies across the world. This is also seen in behavioural investing, where we seek out opinions/pieces that reinforce our view, or attach more credibility to stories that support our investment thesis. Many times our first reaction to a different opinion is anger, whereas it should be curiosity. We should seek out different opinions to critically assess our own, rather than seeking reinforcement which gives us that hit of dopamine and makes us feel better.
At 36ONE we constantly debate (sometimes quite heated) our investment cases and views, which at times are quite different. Everyone can question or criticise analyst views and portfolio managers. It greatly improves investment decisions and pushes the team to improve our performance.
If you have time watch The Social Dilemma on Netflix, it is very insightful. Switch off those social feeds to stop being sold and go out and find some diversity of opinions.