It's been a while.

Tech musings. This was transcribed from a recording I did on the topic. Enjoy.

Over the last couple of days, I guess it's thoughts that have been percolating for a while, I've been thinking more and more about the influence of social media and the concept of virality that exists in our lexicon and in our psyche, and its influence on the economy.  Today, I just want to go through what my thoughts are. I want to preface the conversation by sort of stating that I'm not trying to offer resolve, or a solution, or an in-depth analysis of a why answer to anything in particular, even though it might be framed that way. It's more a reference to analyzing. It's such that I could take it apart and maybe understand it further to help myself better understand the environment and the world that I live in.

What I've been basically thinking about is in relation to the fact that I work in a job that is in the public markets. I work in a job that requires predicting the future through investment analysis and what we call underwriting, which is where we have to look at a product that is good to purchase and to understand how it will mathematically perform based on a bunch of variables and factors that have to be analyzed to understand what the future will look like.

The one thing that any investment person will tell you in the underwritten and what's called a pro forma model, which is your predicted model of information, is that it's wrong. You can't ever guess the numbers right. You're just sort of elucidating and highlighting what could possibly be and whether or not it warrants making the investments so that you can achieve a return that you feel comfortable with.

I always think about the future. I think about my life. I think about all the things that I'm doing and about the information I have readily available at my fingertips, and available to me just from viewing the world. It took a lot of time and training in my mind to be able to wrap my head around underwriting and creating these models that I was comfortable with, mostly, because if I have to make a recommendation to board of directors, and they say, "What do you think?" and I have to say, "I think it's okay. Based on the numbers, it seems like it's important, too, then. Here's how I substantiated all of the evidence."

Being that I have to think about all these factors that go into―and I'm by no means a guru or an expert, I just service my job―it gets me  thinking globally about economics and about how people view themselves in their lives in regards to money-making ventures; and what they're doing in terms of having some long-term sustainable income, be able to retire, be able to enjoy themselves with the things that they want, and what's this as a society that I live in -- I'm in Canada. What Canadians might want is different than what Americans might want, much different than any other country in the world. My frame of reference is really my own society and my environment that I'm around. 

The key point here is that my thoughts aren't strictly influenced by the fact that I go to work in a particular city every day and I have particular influences by the environment that's around me. It's also that I have access through social media to understand people from all over the world. I have social media accounts ranging from Facebook to Instagram. I don't really spend time on Twitter. Instagram is probably the social media platform that I spend the most time on, not only posting my own stuff but also following various people that have similar hobbies or interests in, particularly in cars and other items. But what sort of happens is you start to see, well, there's a gentleman who lives in Poland who is posting pictures of his life, and you start to see that there are certain similarities. You start to develop heuristics around what people desire.

Now, I'm not going to claim that drawing a conclusion about how the world operates because of a bunch of photos that you see on Instagram that may or may not be fake; may or may not be posed, images is a smart way of being but the influence, the outside triggers definitely plays a role in influencing my own thinking and my own behaviors. This is what has caught me thinking about how social media really affects the economy.

The intro to this conversation wants to explain what it is I do about the idea of, particularly, future and how to sort of think about how markets are going to operate, and what factors go into that. But then, there are also the personal biases that are brought into the mix because of outside influences from social media. This is what got me thinking.

Pretty much that the world we live in today is a world that no one could have predicted in a particularly exact fashion as it were 10, 15, 20, 30, 50, 100 years ago. Definitely, we have evidence that people devise, or pontificated, or thought about what the future would look like, and then included certain elements of our lives and technologies that we use today that we take for granted. But specifically, the influence of social media, and specifically, the influence of social media on the mind of the new generation that is growing up that's going from childhood to young adulthood, to young professional hood, to becoming professionals, and just going through their lives and whatever is it they're going to do.

The impact of social media is really something that's so unimaginably influential that, to me, the interesting intersectionality is how it influences economics. I'm going to start with a few ideas. Then, hopefully, bring it all back to the original point of what my method of thinking is and how I was influenced in my mind. Imagine, for a second, a child sees a lot of interesting products by a person―an influencer and says, "Hey, that person looks like they're similar age to me, similar stage. They are living a life that I want to live."

What's going to happen is that child might say either they're going to -- and it's not so binary but I'm just sort of simplifying it by making it binary, which is either they're going to feel bad about themselves in their own lives and where they're at saying, "How don't I have it?" or they're going to figure out a method by which they can attain those things in their own way, and have their own internal centering and confidence to say, "Okay, I'm going to do either what that person did or does and/or I'm going to try to find a job and work in a way that I can attain these things that I want," because in some people's minds, wearing a fancier watch, driving a fancier car, or taking exotic trips is some method of success.

I would like to believe that what people actually feel is lacking in their lives when they see this in other people's lives is not that those people are successful and they have something they don't have. It's more of that people feel that, through experiences, there's a certain sense of fulfillment. So, the experience of wearing a fancy watch, the experience of driving a fancy car, the experience of traveling to exotic places through sort of creating delible memories in your life is what people want. It's not the pursuit of many thing just as an anecdote. Apartments in many metropolis are getting smaller and smaller, and Millennials are spending less and less money on things.

Now, there is a function of the fact and many critics write articles about the fact that Millennials have less money to spend; and the new generation has less money to spend, notwithstanding that that might actually be true, but that is definitely still influencing that people aren't necessarily interested in things as much as experiences. But I digress.

The influence of social media and the virality of the world, and the access to, basically, all the world's information at any given point through your smartphone or your laptop and high-speed internet is that the idea of value of things is what's changed. Whereas in the past, for example, if I was a collector or hobbyist of stamps and I went into my grandparents' closet and I found a box of old stamps, and I flipped through them, and I said, "All right, well, these are interesting. Let's see if I can translate this and convert it into money." 

I should say, I'm not a collector. I'd just start this example over by saying imagine for a second I went through my parents stuff and they gave me an old -- again, I'd take the stamp as example out. They gave me a vintage camera because they had it from growing up in the 80s. It's just this old manual Canon camera. They're like, "Hey, here, take this," and you say, "Great. I don't really like photography. I don't understand the film, et cetera. Let's see if I could pawn this, and maybe make some cash, and buy something more valuable to me today because it's interesting for me."

If you did this in the 90s, you'd go to your local camera shop or maybe speak to some hobby group that you can get in touch with by looking through a phone book. You say, "Hey," to some folks, you say, "I have this interesting camera. Is anyone interested in it?" Some people might give you some offers and say, "Hey, yeah, I'll pay you a couple of hundred bucks." It is because the person wants it as part of their collection. It's not because it's something that's particularly valuable. It may have some rare element to it. Maybe someone will know and protect you and say, "Hey, this camera's serial number is particularly rare. That's really great. It's worth even more money. You should get more money for it." The person might get lucky and "Yay! They got value." The person bought the item they wanted and everyone's happy for it as it worked. 

But then comes along the internet. Now, you can start to access way more people in your life that will give you information and feed you information about what to look for, so you could become a pseudo armchair expert about something you knew nothing about five minutes earlier. Particularly, for example, with the advent of eBay, if you want to find out the price of stuff, see what people are bidding for it. You have this camera and you put online, and you see what people are actually putting this online for seven times the price that I was looking to get for it. I would have been happy with X dollar. But really, I should be getting Y dollar. 

What happens is the value of things starts to change. The inflationary value of things that would have possibly happened for other factors, historically, are happening in a different way because of the sheer vast knowledge that is accessible to any person at any time. So, that person says, "Hell, I am not going to sell this thing for X dollars that I would've been happy with. I could see I wait a little bit longer, but I'll put it online, or tell someone, 'No, this thing is worth Y dollar, and I'm going to wait till I get that eventually,'" you may, as now. Just by waiting a little bit, you've doubled or tripled your, so to speak, investment.

Now, continue along with that, you become a buyer of things. Your sense of value is highly influenced by this vast pool of information that you have at your fingertips. People are what we would call savvier. When you would buy or sell something historically, you may have only been influenced by a very small market that you were in. But now, you are able to see what other people are doing everywhere around the world, while your competition who might not even be competition because they're geographically, incredibly far from you, but what they're doing and what their pricing is. Then, you can figure out how to do it or drive your prices down or up. 

You're getting this market of service industries, as an example, where people are extracting higher value for less dollars from workers because people are driving down the price, but on products or physical items, people are trading them for higher than what they would have historically been for, let's call, what their inherent value is. Now, everything is human device. There's nothing in the universe that has any inherent value. Everything is a human created system. Even gold has some value that's still based on economics, and the environment, and what's going on in the society. There are ebbs and flows in terms of value, but it's been an international currency that every person will always trade gold no matter what. You're not going to say to a person, "I'll give you blocks of wood," or "I'll give you certain kinds of rocks." That may have been historically, and I don't know how commerce was conducted eons ago; but in today's society, they're just the human generated inherently value items. 

Now, the reason why certain other items are valuable is because people are willing to pay for it and because there's a certain labor cost that goes into an extraction cost in order to develop this product. A piece of clothing has a what might be called intrinsic value because there was labor that had to be paid for in order to create this clothes. There's electricity that had to be paid for to generate the fabric, the development of the of the yarn for the fabric had to be -- all these things have costs that are associated with it. There are metrics by which you devise what the cost of an item is. Now, the cost of the item can is arbitrary that once you hit your basic cost threshold in order to cover the cost and everyone's sort of paid along the way in order for you to make money, and ultimately, sell that product, you have to tack on some value higher or lower than that.

What ends up happening though is that historically, if you were, let's say, a clothier that had a shop in some small town and you said, " I'll sell my shirts for a 35 or 40 or 50 or 100 percent profit margin, that means after my cost, after covering the idea of paying my rent, paying my workers' salaries and I have X number items of clothes in my inventory at any given time, that means I need to have this and this percentage over and above in order for me to walk home and make a certain salary that I'm comfortable with."

What ends up happening though is that a person can look and say, "Why would I buy a shirt from you at this price that you're totally within your right to set the price so that you can make your money? If I can just maybe go to the town over or purchase it online, that's going to be for way less because that person has different cost structure or is willing to take a loss on it in order for them to move a certain amount of inventory." 

You wouldn't have been able to notice 30 to 50 years ago. Now, you notice on a way grander scale than you had ever been able to achieve. I like to think about this with the real estate market, generally, in North America, but in particular, in the City of Toronto, which is where I live, which is [where] the inherent or intrinsic value of the real estate that's being transacted is way, way over inflated from its replacement cost. 

There are obviously social factors that go into why people want to live in Toronto and why they would be willing to pay more to live here. It's a simple economics of supply and demand. If there's a certain amount of supply and a certain amount of demand, the demand will outweigh the supply, then prices are going to be driven up. But I believe that in addition to your simple supply-demand analysis that could explain what's going on in a city like Toronto, there's also the fact that I can look online and that enormous information is there and say, "Hey, what did my neighbor sell her property for two years ago?" And I say, "Okay, they got X and it says 'Sold,' they sold it for X dollar, that figure. Hell, why don't I try putting it on for X dollars more than my neighbor? It seems like this is the areas in demand." And what do I do? I do exactly that.

Then, what ends up happening is you end up driving up the cost because you have all this information and you have the onus and the responsibility falls on you to do your proper diligence such that you're actually trying to get the best price that you believe. Arguably, if it was about a charitable mentality or if it was about trying to do social good, I would sell my house for what it would be affordable to someone who can buy it. But if I went and put it online, on the market for what I thought the true value was, or what I would pay for the property that I'm selling, it would be far less than the market, and either will be scooped up for that price and that person will get a steal of a deal or you'll get a bidding war because you can apply this supply-demand economic principles. It's just going to drive the prices of whatever the highest bidder is willing to pay. 

I'm not an economic expert in economic history as much as I sort of anecdotally am analyzing how I'm even making decisions. My frame of reference is my whole world. How I see the world is how I see the world. I believe that if I'm going in and doing something today, it's because I've done the diligence because I have all the information accessible to me at any given time in order for me to make the best financial decision. 

The same goes for our service industries. For example, if I am trying to fix my house or a plumbing job, I can call 50 different plumbers because that information is so easily accessible. Especially, I could start to filter out that I want plumbers that only have five star ratings. So, it starts to whittle down. I'll get three to five quotes. I can call them down. I can say, "Call the first guy." The guy says, "Yeas, that job is going to cost you X dollars." I say, "Okay, great. Thank you, I'll let you know." And I call the second guy on the list, and I said, "Well look, I got it for X dollar, so I need you to do a little bit better on it." And what does that person say? Well, if they really want the business, they'll say either "Sure," they'll say, "Great. Okay, we'll save you 10 percent," or some amount.

So now, I just got the same value, the same service, the same end result for less money. Or the person who will realize their own worth and say, "I can't do it. We can't physically do it." Then, you'll either be left paying the price that you were initially quoted or you will find someone who will eventually get it to the price that you want to pay. That really influences the fact that the market of paying for services, you want to extract the maximum value because you could say to X plumber that Y plumber is willing to do more, and that person might say, "Go to Y plumber." Then, you say, "Okay. Great." At least, you know that you're getting more value than what you would have gotten out of X plumber.

Those plumbers now are making less money than they arguably opt to because their time or product is worth money but they were willing to take on the business in order for them to have their workers working or for them to gain another client. Some people will say, "Hey, it's worth sacrificing on a first job in order for me to make this person happy so that I can get the second job or third job out of that person. Now, whether or not a person believes that they're going to have continued jobs out of a particular client depends on a person's loyalty. For example, if I decide that I'm particularly loyal to people who treat me well in services, I'm going to continue calling them.

But gone are the days that you have that loyalty because you find out that noon the guy on the block is going to charge X dollars less and you say, "Well, I'd rather keep Y dollars in my pocket because of saving that money." Then, you're not really loyal to the person that you would have historically kept as your guy, so to speak. There's this interesting weird time where people are sort of being able to extract value because of the information that they have accessible to them in a way that -- I don't know if it was historically available or easily available for people to conduct diligence. 

Again, in the past, when you're an investment company and you're expected to [do] due diligence, sure. You have to report to your boss and say, "Look, this is the reason why this and this is the price that we're going to spend." If you're a business and you need to get a job done, over the last hundred years, they would have asked you for multiple quotes because they would have said, "Hey, you need to tell us why this is the best price and why we should be willing to pay for it."

The standard regular person who isn't required to do that in their life may or may not have called multiple people. They would have just asked their friend for recommendation and said, "Hey, who did you use when you've got your roof done?" And they say, "Oh, I used Steve from XYZ Roofing." Then, they call Steve from XYZ Roofing and say, "Hey, you treated my friend John well. Do the same for me and get me the job." 

Now, it's like, "All right. I might get a recommendation from my friend but I hear the price, and I say, 'Well, I think I could do better.'" This idea of you thinking you could do better both in saving money but also in spending money is really so heavily influenced because of the Internet and because of social media. This, I believe, also influences why, since 2008, we've been in a very positive strong market, a growing market, is because I think people are now in a world where they're continuing to spend money constantly. The matching of driving down values in one place but increasing values in other places is sort of keeping the economy in check.

Let's jump off this diving board for a second. Historically, I am in debt because I bought a house and I have a mortgage. In 2008, we know that many people were taking on a debt that they couldn't service or they couldn't handle. What they may have done historically is to save themselves from getting kicked out of their houses. They have their heirloom piece of jewelry or something that they would go to a pawnshop and get that extra cash, and they'll save themselves from getting evicted from their house.

What happens is that that person may or may not be saved from getting kicked out of their house. In this day and age where people are able to find more value out of things, they're doing that more often where they're in a shorter time, instead of being heirloom pieces, they're just buying and selling and trading things that have some values; for example, watches like a Rolex, right? The market for used Rolex is incredibly strong because there's a certain amount of affordability. There's an idea that people want that watch. 

People are buying, and selling, and trading them at a faster rate and a greater volume than they may have had done historically because you can be able to trade in a market very easily. So if I buy the Rolex, I could say, "Oh, I'm not worried about unloading it,  because I can just go to Facebook and sell it because I have an audience of a billion people that will possibly see this and some guy's going to pay me what I need. If I end up getting desperate, I need to sell this Rolex that I probably couldn't afford, I could and I'll get some amount of cash, and I'll be able to save myself from being evicted from my house.

Now, I am totally going out on a limb in terms of whether or not that's true. The jumping off the diving board here is what I'm trying to see as happening. The economy is remaining strong because even if people are going to debt and they have undue burden of debt that they can't service and you have all other issues that arise with it, they're trading in their world and they're either overpaying in certain areas in order to extract value for certain things or they're underpaying by certain things in their lives, but that balance is sort of remaining.

People who are working have jobs and money that they're able to spend even if it's check to check, and even if it's a very, very precarious situation economically, historically, the indices would really tell us that we're in a point in the market in the end of 2019 that we're in for some major economic crash. Sure, that might hold true and there will be some sort of economic correction, because there always has to be an economic correction. Totally, in other conversation, we can understand and take it apart why there has to be an economic correction. 

But why it's sort of persisting is because I really honestly believe, and I guess I keep looking for evidence to support that believe, that the economy is in a sense of balance because of the grand volume of information that people have available to them that are helping influence what is valuable and what is valueless, or what they're going to pay more for or what they're going to pay less right now. Remember, if they pay more for something, the person who was the recipient of the money has more money to spend on the market for all the things that they want to buy. If they were underpaid for something, that's just going to be matched by the thing they were overpaid for, and everywhere is sort of going to proliferate and translate into people's lives and how they're going to be able to have income or money to be able to spend on things in order to live.

Traditionally, you went to a job you got paid every two weeks or every month, and use that money to pay for your rent, pay for your other fixed expenses. Then you had your variable expenses that were on top of that. In order for you to maintain that lifestyle, you will either do other side hustles that supplement your income. For example, having the Uber accessible to you, you can work as a side hustle, make extra dollars a month in order to feed your excess. You have extra income. 

Whereas, in the past, you would have been way over your means in terms of spending and other things that you wanted; but now, you can supplement your income in a very basic, non-invasive way. Now, you have more money to spend so you could maintain your lifestyle or you can keep stretching yourself. Then, you're paying more money into the great pool of the economy by having more money to keep spending. It's not as if you're necessarily hoarding that cash in order for you to have savings or whatever. Especially, if you're younger. People aren't necessarily thinking about savings when they're younger, which arguably, you should. But that's not the point of this conversation―to tell a person what they should and shouldn't do. It's sort of just, again, an analysis of what people are doing. 

A gentleman picks me up in this fancy BMW in Uber. We get to talking. What does he do? He's a marketing guy that may be making X dollars a year that he would never be able to if he was physically responsible to afford that nifty BMW. Again, there could be outside influences where the person's family has money and it helps supplement their income, so sure. I'm not judging people. I have other methods of getting money. But strictly, if the person is, on a basic analysis, if they're driving Uber, and they're supplementing their income with Uber, and they're saying, "Look, I can make an extra thousand dollars a month over and above my costs by driving Uber three days a week, then I can afford this BMW. I'm going to have the $50,000 a year job that wouldn't be able to afford that new BMW but I can supplement it by having --" and you could see the point.

Now, in the market, more luxury vehicles have been sold because more people have the ability to pay for them and it sort of just keeps going round, and round, and round. The market is getting stronger and stronger in terms of the things that people want. Again, this is also influenced by the fact that [that] person wants to post on social media and say, "Hey, look! I'm driving my BMW," and then, they have all these anecdotal lines out and these influencer lines, and these feel-good lines like, "Work hard and you're going to do this," and "Life doesn't matter --" and some line that like you read and it's like it came off of some… who the hell knows where. But so many people are saying the same thing and it influences even if it's not true. The onus of filtering what you believe is to be true or not to be true is really on you―the person who is seeing the information. 

Anyways, in summary, I just believe that the influence of social media and the Internet on our lives is so impactful. And it's just unfolding. It's just beginning. We have yet to see how the future will look.