How Social Media Influence the Economy.
Social media exacerbate your anxiety. It could benefit the economy.
Your anxiety has worsened lately; you are not alone. Covid-19 pandemic made our future an uncertain territory. Your social media app reminds it off every minute of every day.
You can’t make projects because you don’t know whether it is possible to make them happen. The new rules made to protect our society from coronavirus keep changing, making it hard to project ourselves further than tomorrow. We act daily in “carpe diem” style. This behavior could influence the economy.
More Money Less Problem.
I listened to a fantastic Radio Lab podcast episode. It blew my mind. I loved when storytellers explained complex theories with simple words. At the end of the episode, it makes you feel like you understood the concept. Most of the time, it is true.
This podcast’s episode was “More Money Less Problem.” It was about the US economy and creating one unique platinum coin worth trillions of dollars. This topic is related to emerging concepts to help the US economy to navigate difficult times like the COVID-19 pandemic.
Inflationary psychology is a state of mind that leads consumers to spend more quickly than they otherwise would in the belief that prices are rising. Most consumers will spend their money on a product immediately if they think its price is going to increase shortly.
Halfway through, the podcast speaker referred to a fascinating theory that has been around for decades. It was a long time ago, but still incredibly interesting.
This was how you, me, customers, business people, and investors could influence the price of goods by thinking about it.
In other words, if you think hard enough that inflation will occur in the future, then the prices will actually rise. Inflation seems to function as an auto-suggestion or like a self-fulfilling prophecy.
This theory is not as crazy as it sounds. No sorcery or magical spells involved. It is purely psychological. It is “inflationary psychology.”
A Fascinating Theory Called Inflationary Psychology.
Basic Rules of Inflation.
Several factors influence inflation. The supply’s availability and the demand are driving the prices of goods. For instance:
- The low demand for limited supplies drives the price down.
- The high demand for limited supplies drives the price up.
Imagine a situation where you want to buy a new car, but you don’t have enough money. You decide to put aside a fair amount of your paycheck every month for two years to afford it. So far, nothing exceptional. It sounds like what most of us would do in the same situation.
Anxiety and Fear of the Future.
When reading your favorite newspaper's financial section, you realized that the cars’ price kept increasing over the past years.
You anticipated that in two years, you would finally have enough money to afford your car. But its price is higher than today. By fear, you decided to ask your bank for a loan so that you can buy it today.
Let’s also say hundreds of thousands of people thought the same way you did. They bought a car at the same time instead of patiently waiting a year or two later.
Well, the car manufacturers are all a sudden overwhelmed with such high demands. The assemblage lines can’t keep up. Car supplies become limited. The price of the cars will inflate.
A Self-Fulfiling Prophecy.
What you thought might happen in the future happened because of the decision you made in the present situation.
There was no certitude that the price of the car would go up in one or two years. But the fear that it might be the case influenced your short-term decision. If your belief comes true, it is a self-fulfilling prophecy.
I found this concept fascinating. It showed interconnections between topics that I would have never imagined could be related. In this case, it is between collective psychology and economy principle.
To push a little further, I’m wondering whether inflationary psychology can serve investors.
Could Investors Take Advantage of Inflationary Psychology?
Inflation is an important process that drives investments. Investors like to buy an asset at a low price and sell it at the highest price to maximize their returns.
Unavoidably, if you bought stocks in a public company, you want it to go up, you need to inform the world about your activities. If you invented “the” remedy that will cure cancers, people would never know about it unless you put the word out there.
The systems of information evolved tremendously over the past decades. We used to learn about the fantastic and promising inventions by reading the local or national newspapers. But now, the internet and social media platforms took over the distribution of information. They made people more informed.
“Social media platforms are likely to convey your message to the entire world.”
For instance, in 2019, Google and Facebook controlled 51.3% of the internet advertising market share worldwide. The other half being owned by giants like Alibaba, Amazon, and Baidu.
It means that social media platforms are likely to convey your message to the entire world.
This behind said, it also means that customers, business people, and investors will be meticulously selected and targeted by impressively smart algorithms.
Unfortunately, the truth being said, where human psychology is involved, the art of manipulation is not far behind.
How Social Media Influence the Economy.
Social media is a powerful tool to reach people like you, me, customers, and investors. They bring preselected info before your eyes and somehow manage to make you buy a related product. As human beings, we can’t resist. It’s human nature.
Actually, we could resist, but we need to be aware of the situation first.
Targeted Ads Makes You Capitulated.
The other day, I spoke with a marketing expert. It was for business. We discussed strategies to increase our visibility and engagement rate with users on social media platforms.
I was stunned by the conversation. The marketer described his strategy with a specific vocabulary. He used the term “capitulation.”
In my world, most certainly naive, capitulation was only used during the war; when the opponent gave up a handover and surrendered.
I thought about it for a little while. The parallel with the marketing strategy was actually striking.
Think about it, if you look at your Facebook app several times a day, and each time, the same ad appears in your feed. What are your odds to click on it? The answer is extremely high.
This is a moment of vulnerability. You are getting familiar with the ad content. You lowered your guard. You can’t refrain yourself. You clicked on the ad. Well, you “capitulated.”
Instant Gratification creates Problems.
For an analogy, the situation is similar to when your child cries restlessly, seeking your attention. It becomes unbearable, and you gave up on your selective ignoring strategy. Well, here too, you “capitulated.”
Could it be calming down your child with a warm hug or clicking on the ad and buying the product? Your action will influence the future.
You gave attention to your child, who, in this specific instant, doesn’t deserve it because of his negative behavior. Your kid may perpetuate this attitude during his adulthood. This type of behavior could cause social rejection and depression.
In other words, this instant gratification you employed to find peace and quietness at home may lead to undesirable consequences in the future. On the opposite side, quietness would have happened eventually if you resisted the crying.
Your today’s actions have consequences on what will happen tomorrow. The fear that this annoying crying might reiterate in the future drives your today’s actions with the hope to prevent it.
Similarly, your impulsive purchasing behavior could influence the value of what you can afford in the future.
Doctor in Science | Entrepreneur | Writer | Founder of Open-Minded Elixir