Fake News! ... or is it?
August 10, 2018
“Fake News!” “Alternative Facts!”
Since the 2016 elections, these terms have been thrown around like candy at Halloween. Is there anything to it or is the term “fake news” … well… fake news? In my opinion, the answer is both yes and no.
Before starting, I want to get something out of the way. I’m staying out of politics for this article. If I wanted to get into politics, I’d run for office. Yes, the term tends to be thrown around mostly in the political arena and at this point mainly by the president toward a specific news organization, but I want to focus instead on bias and how that can affect the news and our perceptions thereof.
Unlike how the term is typically used, I don’t believe that for the most part, anyone in the mainstream is making up facts. There is one truth that gives one set of facts. The issue stems from how the facts are interpreted by human beings who come with their own biases formed by their history and experiences. For example, given the fact: “It’s 60°F outside.”, someone from Florida would say it’s chilly and wear long pants while someone from Canada might wear shorts and go swimming. Same fact, two far different interpretations.
Reporters like to believe that their role is to state “just the facts” and report the news exactly as it happens in an unbiased fashion. However, assumptions are still sometimes stated as truth. For example, this article from CNBC (which inspired these musings) states that Apple won’t get caught up in the FANG[1] meltdown because it sells hardware. The hidden assumption (bias) is that there is a FANG meltdown to begin with, which is not true. While Facebook and Netflix are correcting, Amazon and Google are near all-time highs at the time I’m writing this. One could argue that they are ripe for a meltdown (or not), but to say we are in a FANG meltdown is fake news[2].
Even if the articles they write are completely free from bias (not possible in my opinion, see below), there can still be bias in what is chosen to be covered or not. I won’t say names specifically, but one must look no further than the 24-hour news channels and what they talk about to see the bias that they exhibit. One channel will cover one set of stories while another will cover completely different stories. When they cover the same stories, it’s usually from such differing viewpoints that one wonders if they’re even discussing the same topic.
This of course is not a current phenomenon as the press has always been used to drive an agenda. One can look all the way back to the late 1800s where Joseph Pulitzer and William Randolph Hearst used their papers to further their causes during the era of yellow journalism. Some newspapers today even still have Democrat or Republican in their names which tell the tale of their early biases and target audiences. Speaking of target audiences, reporters need to eat and so they tend to cater to who’s watching to increase viewership which increases advertising revenue – a cynical idea, but something one needs to consider.
Even people deemed experts have bias. People who feel passionate about an area will work in that area and become experts who will then help drive policy. Someone who goes into a compliance department feels passionate about making sure the company conforms with rules and regulations and will thus bias their decisions toward being safer than sorry. Those who love nature will become environmental scientists who will then push policy toward saving the environment. Politicians want to change the world and so tend to be people who are unhappy with the way things currently are. People who don’t care won’t go into a specific field and so there is a natural bias formed just via self-selection.
So, what can we do about bias to keep from being a victim of fake news? Do our best to recognize it – both in ourselves and in others. Be cynical about what we read and hear – even this article! Question everything and consider the motivations of others (what we in the financial services business call “talking your own book”). Notice that I said “recognize” your biases. People who think they have no biases are just fooling themselves and limiting their potential at mitigating them.
Since different people have different biases, seek a second and/or professional opinion. Most reporters – even those on financial news networks – are not trained as financial advisors and so you can’t trust them for objective financial advice. Also, the brain is very good at filtering out unnecessary information, but that can cause us to miss something important[3]. That is the role that we (or your advisor) play in helping you prepare financially for your future goals and objectives. While I can’t say we provide an unbiased opinion, I can say we use our knowledge and outside perspective to illuminate things that your biases keep you from seeing.
Sincerely,
Aaron
Aaron A. Anderson, CFA, EA
Senior Investment Analyst
[1] FANG stands for Facebook, Apple (or Amazon), Netflix, Google.
[2] Another aspect of human psychology we all will recognize and somewhat identify with is the power of suggestion. When a respected financial reporter headlines an article “… FANG Meltdown…”, suggesting, if not implicitly stating, that such a meltdown exists or is imminent, it creates the very real possibility of a self-fulfilling prophesy. Nervous investors start selling FANG-related stocks, and the meltdown that didn’t previously exist becomes a reality.
[3] Watch this one-minute video for a fun demonstration of this in action.
The observations and opinions expressed in this commentary are those of the author and do not necessarily reflect the views of LPL Financial. This commentary is for general information only and is not intended to provide specific advice or recommendations for any individual. You should consult with your personal investment advisor before acting upon any information contained herein. Income Tax services provided by DFS Advisors, LLC are conducted as an outside business activity separate and distinct from our relationship with LPL. LPL Financial does not provide tax advice or services.