Inside The Tech Giants: The Big Business Of Behavioral Manipulation
This guest commentary was written by our friend Richard Peterson M.D., MarketPsych.
“Facebook has learned how to manipulate empathy and attachment in order to increase engagement and make billions.”
~ Jennifer Szalai. Jan. 16, 2019. New York Times. "O.K., Google: How Much Money Have I Made for You Today?"
Forecasting behavior is profitable. But behavioral manipulation is far more lucrative.
Lately the media is angry with Facebook. There are the privacy violations, election influence, partisan bias, and a variety of other real and perceived wrongs. The righteous indignation in the press about Facebook is a bit ironic - the same style of angry click-bait headlines targeting Facebook are also widely shared by Facebook's algorithms to juice engagement on the site. The snake is eating its own tail.
At MarketPsych we monitor media emotions - like anger - to predict economic behavior. In our newsletter last May we described an investment strategy based on media anger such as that being expressed at Facebook. When the media expresses a high percentage of righteous Anger at a company - such as VW after the diesel emissions scandal, or Nike after sweatshop accusations - such stocks on average outperform their benchmark indexes over the following year. Facebook's (FB) stock outperformance in 2019 is another example. Facebook's exponential annual revenue growth ($55 billion in 2018) is evidence of the profits derived when a business can - to a surprising extent - shape their own clients' behavior.
Today's newsletter is not about investment strategies, but something more urgent. On a personal level, modern tech tools know so much about us - our likes and dislikes, content of conversations with others, locations, second-to-second activities, and even our emotional triggers. With prompts and messages catered to our inner emotional life, tech can alter our behavior to fulfill its own objectives - profit. Today's newsletter is a brief review of the business of behavioral manipulation and its important implications.
Monkey Business
“Instead of mining the natural landscape, surveillance capitalists extract their raw material from human experience.”~ Jennifer Szalai. Jan. 16, 2019. New York Times. "O.K., Google: How Much Money Have I Made for You Today?"
It's true that behavioral manipulation has long been the goal of advertisers and propagandists. But the scale and precision of such manipulation has never been so sophisticated and the knowledge of human fallibility has never been so extensive as it is now.
Interfering in other nations' political processes crosses a red line. It is undeniable that Russian intelligence services influenced the 2016 US elections outcomes by nudging voter behavior. (The Mueller Report indicates the Trump team was not involved). The manipulation relied upon the fact that voters are emotional, their emotions can be aroused by social connections, news, and images, and they are unaware of these influences. See this exhaustive Wikipedia page on the 2016 election interference and the ongoing Russian-sponsored influence operations....MORE
On a personal level, Facebook, Amazon, Google, and others direct micro-targeted advertising at us. This advertising is intended to pry open our wallets, and it is increasingly effective. Here's a terrific and highly recommended summary of precisely how this is done, written by a data scientist.
Facebook gathers data from many unrelated sources about you, including your cell phone location and web surfing habits. After you've clicked 10 Likes on Facebook, it can predict your personality and behavior better than a colleague, after 180 Likes better than your spouse, and after 300 Likes Facebook can predict your behavior (E.g., what you'd like to buy, where you would most enjoy vacationing and living, and even who you'd most enjoy marrying) better than you yourself. See this and this academic article on their personality profiling process. With such personal knowledge of you, advertisers and those seeking page views draw us into online relationships, outrage vortices, and compelling conversations that keep us interacting with an algorithm-fed distortion of reality....
