Sunday, July 25, 2021

Influencers and Investments

Influencers can sell a lot of things, including investments.

Probably one of the most interesting developments in marketing in the 21st century has been the rise of the influencer.   Sure, influencers existed in times past, but on a much more primitive scale.  Perhaps, as a teen, you'd follow the antics of your favorite rock star or celebrity, and then try to mimick their behavior and clothing styles.  And you'd buy their albums and go to their movies or whatever other venture they were involved in.

But it was rare that such influencers sold more than their own products.  In fact, we would have rebelled if some rock star started blatantly hawking products - they would be selling off their own authenticity, which in turn was their very currency.  Imagine the Rolling Stones interrupting a concert to make a pitch for Coca-Cola.  It wouldn't have gone over well - back then, anyway.

The Simpsons, in an early episode (before, I think we can all agree, Fox turned it into crap) featured Krusty the Clown doing edgy stand-up comedy in the mode of George Carlin.  He decries corporate greed and the wall street fat cats, until they make him an offer he can't refuse.  He ends up hawking the "Canyonero" - a bloated SUV - and his fans flee in droves.

Of course, since those days, we expect our celebrities and rock stars to endorse products other than their own.  Athletes compete for endorsement contracts from sporting goods makers and makers of sports drinks.  They hire marketing experts of their own to groom and enhance their image, and figuring out what products to endorse is part and parcel of this.  Rock stars blatantly have "sponsors" for their rock tours, even as they charge $200-and-up for a ticket to an "oxygen seat" in a stadium, where the performer appears to be the size of a head of a pin.  And of course, our movies are now invaded by product placements, where a character will just casually consume a soft drink or beer, with the label of course, facing the audience.  Even Schindler's List had product placements in it.

Of course, many sci-fi franchises suffer from lack of product placement.  You can't put a can of Coca-Cola in the hands of Darth Vader, as he lives in a galaxy far, far away.  But never fear, George Lucas has done a bang-up job of marketing numerous products spun-off from the franchise, from toys to t-shirts to just about anything.

But in the early 2010's, we started to see a new form of "influencer" on the Internet.  These were people who had blog sites and YouTube channels and whatnot, that attracted "followers" (Like and Subscribe! as they say) and would "review" products and get paid - an awful lot of money.  A young kid, barely 7 years old, makes millions just playing with toys.  Well, his parents made millions, anyway.  It remains to be seen what the kid will get when he turns 18. Despite "Coogan's Law" child actors are still being ripped-off by their parents. Ask McCaulay Culkin about that.  But I digress.

Mark follows some of these channels.  And sometimes, they can be helpful.  When we bought a roll-top tonneau cover for our pickup truck, we looked at a dozen "review" sites online, run by guys who were hoping to make that sweet YouTube bucks by putting up videos and getting followers.  Most don't make squat.   They do get free product from the manufacturers, of course, and some were up-front about this, which made their reviews more honest.  But you can kind of read-between-the-lines on these things, and I am not sure we were so much "influenced" by the videos as they confirmed the choice we intended to make was the right one.   But the human brain is a tricky thing, and often we don't understand how it works ourselves.  So, who knows?

And perhaps that is the scary part of this.  When we see a blaring ad on television, we turn the sound down.  We know it is an ad, and maybe it influences us by making us aware of a product or learning the jingle of the company.  We realize, consciously, these are promotions.  But then again, they also subtly influence us.

Influencers, on the other hand, can be more subtle.  Or not. There are legions of idiots out there who will follow any pied piper, and will willingly buy any product endorsed by their favorite influencer.  If this means a new pair of shoes endorsed by the Kardashians, or a widget for your camper endorsed by some couple Airstreaming Across America! (tm), the harm is pretty low.

But then, someone figured out that you can sell Investments this way.  In a recent article online, some young folks decry being "influenced" to buy some sketchy "altcoins" online.  They are pissed off because these alt-coins are scams, they claim.  But of course, Bitcoin isn't a scam, right?  And Elon Musk and Sooze Orman aren't influencers, are they?

Go online and google "Bitcoin Price" and you will be treated to a host of SEO articles and sites where "experts" on Bitcoin say things like, "My target price for Bitcoin is a Trillion-Zillion Dollars!" without really saying any concrete reason why this would be.  Again, Bitcoin, like all digital currency, is based entirely on scarcity.  Scarcity of any commodity determines price, not underlying value.  So for example, the price of gold is determined by scarcity - the law of supply-and-demand - or perceived scarcity, which is what drives the price of diamonds. 

Diamonds, it turns out, are pretty common things.  You can make them, flawlessly, in a laboratory (or factory).  And at first, the diamond people had an informal arrangement with the lab people to only make "artificial" diamonds for industrial purposes - diamond grit for grinding equipment and saws and whatnot.   But that sort of went by the wayside when larger and larger diamonds could be made.  So today, the diamond mining people extol the virtues of "natural" diamonds, which have flaws in them, unlike "artificial" ones.  Oddly enough, it wasn't long ago, that the same people were extolling the virtues of a "flawless" natural diamond.

But diamonds and gold have a uses in the world, other than as investment.  Diamonds have a number of industrial uses, and gold is a great conductor that doesn't tarnish or corrode.  Both are useful for jewelry, too.  But cryptocurrency?  It's only real "use" is in paying ransoms or buying arms, drugs, or children.  And since governments are clamping down on these things, these "uses" may disappear in short order.  The US Government was able to "claw back" much of the ransom paid recently in a ransomware attack.  If that's the case - what's left for Bitcoin?   And no, you will never be able to use it to buy a Starbucks - the cost of each transaction exceeds the price of a cup of coffee.  It isn't a currency.  At best, it is a clunky expensive way to transfer money, semi-anonymously.

So that just leaves scarcity.  The "Sooze" Orman opined that it intrigued her as a "virtual gold" investment.  But like I said, at least gold has a real value.  Even if the price is bid up over its production value (as happens, time and time again) it can't crash down below its real market value - at that point, smarter investors buy it.  But crytpocurrencies?  They can go all the way down to zero - much as stocks sometimes do, when companies go bankrupt.   And many "cryptos" have done just that and more will likely.

That's what made me fall out of my chair laughing, reading that article.  These folks, many of them young men, blindly bought something they didn't understand, because some "esports" star was promoting it or whatever.   I guess if they only lost a few hundred dollars, it was cheaper than tuition at a local college.  That is the tuition in the school of hard knocks, however.  And in that regard, if all they lost was a few hundred or a few thousand, they got off cheaply.

But this extreme case is just the tip of the iceberg.  It seems that all sorts of investments are being hyped these days - and this isn't going to end well.  It never does.  Retail investors (read: chumps like you and me) are highly irrational investors.  The "invisible hand" of the marketplace can be easily swayed by emotional beliefs, with FOMO being the worst of them.   Buy now, before you are priced out of the market!  Don't you wish you bought Apple back in the day?

But of course, Apple stock has a tortured history - it languished for decades, and Steve Jobs was actually fired from the company at one point.   And even today, Apple is based on one product - its smart phone.  And recently, Apple has sank from Number two to number three in the marketplace, being supplanted not only by Samsung phones, but by phones from Xiamoi in China.  In terms of platform, however, Apple has a tiny share of the market - with Android phones making up over 70%, much as PC's make up the dominate share of that market as well.   Again, perception trumps reality - people will pay $1200 for an iPhone, when you can buy an Android phone for less than half the price.   But then again, you don't have bragging rights and a trendy logo.

Apple sells most of their phones in the US, much as Mercedes and BMW sell most of their cars here as well.  Americans love status - and they can afford it, or so they think, anyway.  Americans are highly irrational people - overweight, overfed, and overpaid.  So we breathlessly buy whatever thing we think will make us look better, or what will make us fabulously rich.

In the past, I fell for this as well - and still do, on occasion.  When the economy fell apart in 2008, I started this blog, as I was trying to figure out what went wrong and what I did wrong.  While others were blaming big business or Wall Street, I tried to look inward and see what I could do to change my lot in life.

This article about clueless "gamers" buying alt-coins based on promotions from influencers, is a case in point.  The people who lost money in this scam don't blame themselves for being idiots, but rather blame the influencers for making them do it.   Nothing is ever our fault!  You put your finger in a light socket and electrocute yourself, it has to be the fault of the electric company, right?

Taking control of your own life means not handing over control to others.  Asking others for advice is one thing, blindly following it, is another.  When someone tries to sell you an investment, promising you riches beyond your wildest dreams, you have to ask yourself why they are telling anyone about it.  Because if it was such a sweet deal, they would be investing in it themselves and not telling anyone about it, because they'd want to keep all that profit.

Oh, right, they want to help out their fellow gamers!  Give me a break - history has shown how awful gamers treat each other - SWAT-ing and Doxxing one another, and tearing each other down online.  You want to take investment advice from them?

Or anyone?   Taking investment advice from anyone who has a dog in the fight is always a bad idea.  The nice man at the storefront investment company (and you know which one I am talking about - coming to a strip-mall near you!) gets a percentage of your investments.  So he tells you to invest with them.  The life insurance salesman gets a commission on each sale - so he sells you one policy after another.

I suppose even I have an angle, but I have yet to figure it out.   But not a day goes by without someone e-mailing me asking to do a "guest posting" about payday loans or extended car warranties or whatnot  (and not in a negative sense, I am sure).  So there are influencers who try to influence influence.  It never fucking ends, does it?

I don't feel sorry for these "esports" (Really? Gaming is a sport?  Will in be in the 2024 Olympics?) players.   What is sad to me is that they learned nothing from their experience, choosing instead to blame the influencers and not themselves for being so stupid to buy into investment advice from strangers on the Internet.

This will not end well!