“‘The battle for elections, issue campaigns, market share are all fought on social media now, and social platforms are designed to reward the most engaging content—not the most factually accurate,” says Renee DiResta, a San Francisco-based technologist who studies the impact of social media on political movements. “The side that comes up with the most catchy hashtag, emotionally resonant narrative and viral meme is better positioned to grab attention.”
DiResta’s emphasis on the emotional resonance provided by radical views on social media hints at the human needs they fulfil—for a sense of stimulation and of connection. Considering that areas in support of both Trump and Brexit feature lower education levels and lower population density, might it be that the reason 50/50 politics seemed unthinkable to the ‘smart money’ is the very same thing that motivates these movements: the relative isolation and low social capital of these movements in the real world? Ironically, those with a limited profile in real life are often the most highly motivated to create a virtual community on social channels.
While betting markets may have inaccurately pegged the likelihood of Brexit or the rise of Donald Trump, these events were not unpredictable. Predictions based on social media were more accurate. Twitter data gathered by TickerTags, a social media analytics tool, found a ‘Leave’ vote was the most likely outcome of Britain’s EU Referendum before polls closed. It was not until late into the evening, after analysts had calculated the results of exit polls, that news organisations and prediction markets could verify which side had won.
SO WHERE DO 50/50 POLITICS LEAVE INVESTORS AND BUSINESSES?
Conventional measures are likely to continue to understate the tightness of impending votes. The public’s proclivity to act independently of ‘expert opinion’ is likely to persist, given the ever increasing popularity of social media as platforms for information and debate.
For investors, treating all political events as potentially 50/50 outcomes, therefore—and accepting that these events are more uncertain—seems prudent.
For business, the emergence of 50/50 politics presents a more challenging paradox. Businesses need to acknowledge policy debates are no longer being conducted exclusively among the traditional commentary class and new patterns in social mobilisation are an unstoppable game changer.
Business participation in the public debate has, therefore, never been more important, but ‘just’ participating won’t be effective. It needs to be in the right form and at the right level.
Richard Yetsenga is Chief Economist at ANZ
This paper was first published on ANZ's Institutional website.