Going Viral

Cory

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Cory Hill

Financial Advisor

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Going ViralRecently, there was a study done by Princeton’s Department of Mechanical and Aerospace Engineering on, of all things, the life cycles of social media.

Using epidemiologic models that are used successfully to describe how diseases spread rapidly and then suddenly die, the team of researchers predicted that by 2017, the social media site, Facebook, could see a loss of 80% of its peak user base.

The results of the study have been widely reported, including Facebook’s own data scientists who put out a satirical study showing how it is Princeton University who is susceptible to losing a majority of its student body over the same time period.

Facebook interpreted Princeton’s study with the scientific principle of correlation equals causation, and followed this logic when it issued its own study about the longevity of Princeton. An example of correlation equals causation would be to deduce that more people drown when ice cream sales are higher, so ice cream causes drowning. Of course ice cream does not increase one’s risk of drowning but both are more prevalent in the warmer months.

Bearing this in mind, let’s look a little closer at Princeton’s study. This study is not a peer-reviewed study so, as such, it has not stood up to the rigor of analysis as other peer-reviewed studies. It uses epidemiological models (which I think makes sense) to describe the spread of social media sites like Facebook, basically saying that the more people around me that are using Facebook, the more likely I am to be “infected” and become a user. Over time, I may “recover” from my “infection” as I encounter more people who have either already “recovered” or who may be “immune” to let’s say, a Facebook infection but infected with a Whatsapp virus.

What I found most interesting about this study has nothing to do with Facebook or any social media sites but, rather, how it illustrates how we as humans interact with one another and the world around us. These same models could be applied, quite successfully to investments; whether it’s real estate, precious metals, oil and gas, or a myriad of other investments. At one point or another, the narrative about a particular investment takes hold in investors’ minds and, spreads quickly to a point where it seems that everyone is “infected”. Then, as we and those around us begin to recover, we become susceptible to another “bug”. One infection begins to suddenly and dramatically die off and is replaced by another. Various types of investments, like viruses, can catch on quickly and the idea can spread at a dramatic pace to the point that it seems like everyone is talking about it or knows someone who “got it”.

Boomernomics, technology stocks, peak oil, gold and precious metals; we’ve seen these “viruses” come and go and I’m sure we all know someone who got sick!