As I discuss in the July 2022 post “Fixing the Expertise Misallocation Problem“, having a large social media following and a lot of media coverage or clout is a poor predictor of “useful, actionable advice” or accuracy. It’s as if those who have the most followers, visibility, or status who are the least effective at their jobs, or give the worst advice, or recommend the worst investments. There is a problem in which society systematically promotes people who are the least competent at their jobs. This has economic implications too; it’s possible GDP is being held back by the suboptimal allocation of expertise.
Why is this? Some explanations:
First: Audience capture. Someone may knowingly disseminate wrong or sensationalist information to appease his audience and earn more ad revenue.
Second: Skill mismatch. It’s possible the skillset required to grow a large brand is orthogonal to accuracy or usefulness of said insight.
Third: Bandwagon effect. Sensationalist commentary is more likely to go viral and beget more coverage and support. In the ‘marketplace of ideas’, bad ideas or bad beliefs tend to prevail.
Some notable examples:
Marc Andreessen and his VC firm A16z heavily promoted and invested in cryptocurrency projects from 2021-2022 (before pivoting to AI). His timing could not have been worse, buying at the top of a major bubble. Many of his investments are worthless, even as bitcoin has recovered and made new highs. Marc Andreessen’s Twitter account has 1.8 million followers, which I surmise are the remaining users he hasn’t yet blocked on the site. His various firms and employees have a combined millions of followers, so again, more followers typically does not mean better advice.
Mr. Andreessen was an early investor in Facebook/Meta, which paid off greatly, so it’s not as if all his investments are duds, but the key difference is Facebook was nearly instantly successful in terms of profits and worldwide user adoption from the onset, like Google, whereas crypto doesn’t have those characteristics, being mostly speculation or a niche even a decade later, not mainstream or hugely profitable as in the case of Facebook or Instagram.
Early Facebook executive Chamath Palihapitiya is widely promoted by the mainstream financial media as a ‘venture capitalism expert’. But his SPACs have similarly greatly underperformed, even as the stock market recovered in 2023-2024:
Some of the investors—among his 1.8 million Twitter followers—have voiced their frustrations in the replies to his tweets. If misery loves company, given how many followers he has, there is plenty to go around. They would have been better off investing in the S&P 500.
Another example is Cathie Wood. Like the above examples, despite being heavily promoted by the media, her flagship ARK Innovation ETF (ARKK) has similarly lagged benchmarks such as QQQ. Her personal Twitter account also has 1.8 million followers. So again, more followers does not mean better advice.
In regard to policy, health experts during Covid overestimated the efficacy of masks and social distancing. There was no correlation between the severity of lockdowns and other restrictions vs. relapses of Covid or infection burden. Countries which had among the strictest lockdowns, notably Germany and China, had many relapses.
Studies were cited as justification for the lockdowns. Except that just because something works in theory or worked in the past, does not mean it will work for the present situation. The failure of ‘flatten the curve’ is an obvious example of this. The extreme virulence and propensity of Covid to mutate, combined with the economic devastation and social unrest brought about by lockdowns, meant it could never work. Had dissenting (but correct) voices been given more attention, the lockdowns could have been avoided.
Same for social media, in which dissenting voices were censored due to accusations of racism or for spreading ‘misinformation’, even when proven correct later, such as the possibility of Covid having escaped from a lab in China, which now even the CIA admits is credible, but in 2020-2021 mentioning this would have gotten you banned.
When Russia invaded Ukraine in Feb. 2022, foreign policy experts predicted a decisive win for Ukraine or that Russia would be crippled and its economy devastated. Few people, myself among them, correctly predicted a multi-year stalemate. Russia’s larger military was offset by U.S. aid to Ukraine, so the result was a standstill, with neither side having the resources to win.
After Elon Musk acquired Twitter in April 2022, the media predicted that Twitter would die or succumb to competitors such as Bluesky or Mastodon. Three years later, Twitter has managed to hold on. Its competitors remain tiny despite an initial influx of users and media hype, many of whom have since quietly returned to Twitter. Twitter also successfully pivoted to AI thanks to Grok, helping Elon recoup his large investment.
Political experts on either side of the aisle in 2022-2023 were certain Trump was ‘done’ and would be prevented from seeking reelection due to mounting legal challenges. I correctly predicted he would persevere.
The Trump liberation day tariffs were predicted to cause untold economic destruction and inflation. Although the market fell a lot initially, stocks quickly recovered after Trump backtracked. Pundits underestimated Trump’s tendency to cave. I was correct in predicting he would. Inflation was also muted in spite of media predictions of shortages and empty store shelves. Now even the liberal media like CNN has to concede the promised inflation surge never came to be.
Most recently, not just to pick on the left, after Trump launched attacks on Iran, many of the largest right-wing/MAGA influencer accounts on Twitter/X accused him of ‘selling out’ or predicted a quagmire reminiscent of the Iraq War. Meanwhile, more nuanced perspectives from smaller accounts were drowned out by the sensationalism of the ‘big accounts’. Trump came out looking good as Iran and Israel entered into a tentative ceasefire days later.
As I correctly predicted, according to a recent poll, support for the strikes fell along predictable party lines (the majority of Republicans supporting it), and that Trump’s overall approval did not fall much, contrary cries of ‘betrayal’ over the weekend:
A new poll from Quantus, conducted between June 23 and 25 among 1,000 registered voters, shows Trump’s approval slipping slightly to 47 percent, down from 48 percent. His disapproval rating rose 1 point to 50 percent, giving him a net approval of -3 points, down from -2 points earlier this month, but still within the poll’s ±3 percent margin of error.
Polls suggest that Trump’s decision to launch Operation Midnight Hammer has given him a short-term boost on key aspects of foreign policy. A Quantus survey shows 47 percent of Americans approve of the strike, while 36 percent disapprove, giving the operation a net approval of +11. Approval is strongest among Republicans (75 percent), while 61 percent of Democrats disapprove. Independents are split nearly evenly.
The attacks hardly moved the needle in terms of approval, like I said. This is not to condone the strikes, but those who were expecting Trump voters to defect or disavow because of Iran, were just projecting their desires. There is no historical precedent for this given that war has always been popular among Republican voters.
This is why you have to always be skeptical of popular narratives. In the case of bad policy, policy elites are not as smart or objective as commonly assumed. They are acting on incomplete information and are affected by biases, like everyone else. In regard to social media, more followers likewise does not mean better advice. The evidence above, if anything, suggests an inverse relation.