Disclaimer: I wrote this blog over two weeks ago. Then the social media world got turned on its head. I considered deleting because I was afraid it might be viewed as political or controversial. That was not my intent, and I think my writing makes that very clear.
Newsletter and the information contained herein is not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice. Opinions contained within this letter are my own and not those of my employer.
On February 28th, 1983, an estimated 105 million people sat down to watch a single episode of television - the series finale of the hit show M*A*S*H. To put that in perspective, the highest rated scripted television program in 2019, the Big Bang Theory’s season finale, reached ~24 million concurrent viewers. A quick take-away from this could simple be that they just don’t make them like they used to.
But that’s not totally true. We are currently living through an unprecedented period of quality television that some refer to as the Golden Age of TV. And I would wager that if someone tried to air a hit TV program from the 80’s on one of today’s broadcast stations, it would get absolutely slaughtered in ratings compared to its original air date. The reality is that TV has gotten exceptionally better. Great TV artists have learned from the great artists of prior generations and have created an industry that is highly profitable, receives gargantuan investment levels, and greatly impacts culture.
But the difference between now and then is that, in 1983, there just weren’t nearly as many options as there are today. Cable television didn’t really start bucking its head until the middle of that decade, and even then, it was viewed as a premium product, not something that was ubiquitous. A consumer’s choices for entertainment were limited to broadcast TV, some smattering of cable, radio, and of course timeless media such as books, theater, newspapers, and your social circles.
Meanwhile, in 2021, the race for a consumer’s attention is at an all time high. Much like the 700-year decline in interest rates, media has been getting more and more fragmented throughout all of human history, dating back to the days of only receiving your news from a town crier. Media fragmentation is almost constantly at its peak. However, there are points in time when different media tools are the dominant force in human culture - Gutenberg’s printing press, radio in the late 19th and early 20th century, and television in the late 20th century. Included on that list should be social media. However, there are a few characteristics of that medium that have prevented it from achieving cultural domination thus far.
First, the internet is still pretty young. While it has altered the way that we live, work, and do pretty much everything, it is still in its infancy. Most of the inventors and godfathers of the internet are still active in the game. The folks who shaped the early internet, like Marc Andreesen, are still having a massive impact on the future of the world wide web. Mark Zuckerberg is still helming Facebook. Jack Dorsey is still running Twitter. Larry Page only stepped down from Google in 2019. So while you may look at Google’s landing page from 2001 and feel a sting of nostalgia compared to today, you need to understand that was only v1 of the same product. The next generation of great social media products and social media will be built by people who grew up using social media and, as such, will view it through a new lens. This likely means that these media channels have a lot of room to run. Much like how early television programming looked like radio programming, I think we are still in a period where a lot of internet content still looks like more traditional media. Hell, people are still calling Netflix “TV”. Obviously it’s something different.
The second, and probably more important aspect of the internet’s inability to create monoculture is that it is still extremely democratized and decentralized. The company’s that are at the top of the internet game today are platforms. They provide opportunity for other content creators to control the conversation and thus don’t necessarily control it themselves. While that is a fairly controversial opinion depending on what platform you are talking about, it is still broadly true - Facebook doesn’t write the news, they just let anybody who wants to share it do so on their platform. In the past, there were gatekeepers who would determine what information got shared with everyone in culture (National Radio Stations, Broadcast TV Stations, Big Newspapers, etc). Today, however, those gatekeepers don’t have the same kind of editorial power. They can kick folks off of their platforms (amid heated controversy), but they can’t tell all of their creators what to say and how to say it. They can edit their algorithmic feeds, but only to a point. And a lot of them deny their ability to do so with too much effect. While it feels very possible that gatekeepers will someday have considerable power over content on the internet, that day is not today.
[I should note that is a misnomer that these platforms are completely unmonitored. Facebook currently employees ~30,000 people to monitor the content. Other social media platforms have a similar count based on usage. These platforms are heavily monitored compared to almost everything else on the internet. But they are just following community guidelines, not editorial standards.]
The largest mindshare that any social media platform has with US adults is YouTube, at 73% of all adults. However, if you were to dig into that stat and try and figure out how each adult uses that product, you would probably find that it is pretty varied. Some use it for learning how to cook, some like to watch instructional videos, and others do it to follow their favorite vlogger. There are millions of use cases for YouTube, and none of them are particularly dominant (other than watching music videos, which is a whole other can of worms).
Billions of different opinions are being shared with billions of different consumers in billions of different ways. There is nothing universal or monocultural about the media we consume, and even the biggest cultural touchstones of today are shared with a much smaller group of people than they were 35 years ago. As a result, nobody shares the same set of facts, the same set of opinions, nor same views on the world than pretty much anyone else. This has and always will be true for the human race, but it has never been more true. Everything is niche, controversial, and personal.
This reminds me of one of my favorite webcomics:
That’s all nice, but what does it have to do with investing, finance, the economy, the midwest, etc. etc. etc.?
Where this leads me is that the inverse of the Efficient Market Hypothesis is massively at play in the world of private company investing. Of course, when most people talk about EMH, they are not talking about Private Equity or Venture Capital - private companies inherently don’t share that much information. As a result, it is hard for that information to be fully baked into highly-illiquid share prices.
However, as more information becomes available in our ever-connected world, one might think that PE might reach some semblance of pricing efficiency. My proposal is that the inverse is true. As more information floods into the universe, it’s less obvious what to pay attention to. It’s also harder to focus on the right information. Humans only have so many hours in a day. Their content choices (content diet, if you will), are boundless, but their appetite is very limited. In a time of abundance, we don’t necessarily get fed in an extremely healthy way. Some folks will over-indulge and pay attention to all of the wrong things.
As a result, the true skill for an investor in today’s day an age isn’t knowing everything about an investment. It’s knowing all of the right things. Paying attention where you actually need to pay attention and not getting distracted.
This is a skill I am constantly working on and have only seem to achieved a small amount of progress. I am always struggling with my content diet. Part of the problem is that I want to know everything. But I have to come to terms with the idea that I will never know everything, and that’s probably a good thing. Nobody knows everything.
Friday Links
Love this thread from Julian Shapiro. He’s a good follow and I recommend his stuff.
How to Improve Your Content Diet in 2021
Tremendous stuff from Polina about your content diet. This ties in pretty closely with what I wrote about above. Start thinking about the content that you are consuming the same way you think about the food you eat. If all you consume is junk, that will have negative effects on your life.
One Step Closer by Ryan Atkins
I finished this book by Ryan last week and loved it. It’s a deeply spiritual book about finding meaning in life and vulnerability. I got to know Ryan while I was at UC and he and I occasionally banter on twitter and instagram, so I am a little biased, but I think his story is something everyone should listen to. He’s a source of wisdom that is so refreshingly optimistic and humble that it will make you reevaluate how you view certain values you have in life, in a good way.