“That’s just the way it is, Things’ll never be the same.”
– Tupac Shakur
A Jan. 12 article in Phys Org entitled “‘We conclude’ or ‘I believe?’” summarized a study conducted by scientists from Wageningen University & Research (WUR) and Indiana University that “shows that over the past 40 years, public interest has undergone an accelerating shift from the collective to the individual, and from rationality towards emotion.” The researchers reached their conclusions by analyzing millions of books and recording the relative frequency of words associated with rationality (e.g., analysis) versus those associated with intuition (e.g., feel) and the ratio of singular to plural pronouns (e.g., “I”/”we”).
The study found that the relative frequency of rationality and collective words increased starting around 1850 until 1980 at the expense of intuition and individualistic words. Then, starting around 2000, the relative frequency of intuition/individualistic words underwent a parabolic upside move. Explaining the post-2000 experience is not hard, it lines up with the internet becoming a ubiquitous part of daily life, which was turbo-charged a few years later by social media. Regarding the 1850 to 1980 period, lead researcher Marten Scheffer of WUR posited that one possibility is “that the rapid developments in science and technology and their socio-economic benefits drove a rise in status of the scientific approach, which gradually permeated culture, society, and its institutions ranging from education to politics.”
Of course, the period of 1980 to 2000 is of significant interest. It’s clear in the data presented that something was changing in society starting around 1980. If we can diagnose the original cause, perhaps it could inform better public policy. More likely, we can learn something that could inform better habits. The authors draw a possible connection to “tensions arising from changes in economic policies since the early 1980s, which may have been defended on rational arguments but the benefits of which were not equally distributed.” Perhaps, but in the interest of avoiding intuition words, I’d like to put forth another, non-politically charged, alternative.
The media business began fragmenting in a material way in the 1980s. Warren Buffett describes the effects of this change in his 1991 letter to Berkshire Hathaway shareholders:
“Consumers looking for information and entertainment (their primary interest being the latter) enjoy greatly broadened choices as to where to find them. Unfortunately, demand can’t expand in response to this new supply: 500 million American eyeballs and a 24-hour day are all that’s available. The result is that competition has intensified, markets have fragmented, and the media industry has lost some – though far from all – of its franchise strength.”
Of course, the internet and social media came along and shattered the media industry into many more specialized pieces. It seems obvious at this point that the fragmentation of the media has led to more discussion of feelings than facts.
Tying it back to capital markets, since that is what this column is about, it seems rational to expect this societal backdrop to result in more frequent bubbles. This doesn’t have to mean systemic bubbles (e.g., the dot-com and housing bubbles), but could manifest itself in more mini, rolling bubbles (e.g., meme stocks, joke crypto currencies and SPACs). By mini I mean small in terms of their systemic impact, not the magnitude of the price versus value dislocation.
In a bit of good news, maybe, the the relative frequency of intuition and rationality words appears to possibly be plateauing. Perhaps the worst is behind us. Dear God, I hope so.
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Chas Craig is president of Meliora Capital in Tulsa (www.melcapital.com).
