The economy and social media: Bubbles and troubles

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Human beings are funny campers. We seem to like repeating history, often not learning from that which has come before, and tending to repeat the same cycles over and again.

The current recession is evidence of that. I was 10 years old when the recession of the early 90s hit the UK and I remember it well. I remember that at the time there was a lot of freely available credit, people were slapping everything on plastic, and property was being snapped up left right and centre. Then boom! It all crashed, and negative equity was the order of the day. Who benefited from the bubble as its high point? Banks and financial companies. 

Nearly 20 years later, and the same cycle was being repeated – easy credit, low interest rates and people spending and snapping up properties, mortgaging themselves up to the hilt thinking that the good times would last forever. Then, once again, boom! And it was back to repossessions and recession. Who benefited from the bubble as its peak? Banks and financial companies. Yes, the same ones who made consumers believe that having tons of credit and a huge mortgage was a good idea for them. 

Maybe at the age of 10, I realized that bubbles meant trouble. When everything suddenly seems as if it’s on a never ending positive rate of climb, there is at the end only one way to go – and that’s down. Why? Because never ending growth is unsustainable. It just isn’t natural – the cycle of life is growth and decay, not ongoing perpetual growth. Notice that, in the human body, when cells grow and grow and grow and multiply without regulation, they call that cancer. 

The same boom and bust happened with the DotCom bubble. It seems to be happening again, this time with Social Media. These bubbles follow the same progression, each and every time, yet each and every time, it is only a handful of people who seem to see what’s really going on. Those issuing the warnings are often ignored – until it is too late. Just today, writer Ewan Morris published an essay in The Guardian outlining why social media isn’t really all it’s cracked up to be for self publishing

Still caught up in the social media madness, many want to believe that this revolution will last until kingdom come. However, with the shares of social gaming company Zynga, Facebook and Groupon at all times lows, it is becoming increasingly clear that something is amiss in the social media world.

While the average person has been roused into believing that all they need is Facebook, insiders at Facebook have been cashing in – just as the banks and financial institutions did in the early 90s when I was 10 years old just before the economy nosedived, and have done in this current recession. 

It doesn’t matter so much for the average person if there is a social media bubble or not. They will just move on to the next iteration of technology. However, it does matter for people whose livings are made in connection with these things. Investors, writers, publishers, musicians and many more – those who have bought into this and who dedicate their money, time and resources into these things, believing that doing so will provide significant return on investment, that – quite frankly – often it doesn’t for the majority in the long run. The problem is that we live in quite a reactive world driven by the fear of missing out. That fear drives people to do things just because that’s what everyone else is doing – which means that it is easy to be manipulated by those who know how to press your buttons; usually those who have a vested interest in you spending all of your resources on their site/platform.

I’m not anti-social media, this is just a note of caution. It has its place, you just need to know what that place is. It is worth exploring whether the current fad is indeed the best, most efficient, most productive, most worthwhile way to go. You may find that the answer is, actually, not really.