What is fake news?
And can fake news impact your finances?
With NZ’s general election coming up and the world in the grips of an international pandemic, knowing how to spot fake news, misinformation, and conspiracy theories is more important than ever.
The term “fake news” has varying definitions, though can be approximately defined as poorly researched, heavily biased, or intentionally incorrect journalism. It is often of a sensational nature and is created to be widely shared or distributed for the purpose of generating revenue (as major websites get paid for hosting online adverts), or promoting or discrediting a public figure, political movement, or corporation. Fake news undermines professional media coverage and makes it more difficult for:
- journalists to cover significant news stories, and
- all of us to make logical decisions based on factual reporting of information, and robust analysis of that information. This includes financial decisions.
What’s the problem with fake news?
Don’t get us wrong:
- An open and unbiased media is an excellent feature of the free world, and
- Freedom of speech is one of the cornerstones of democracy. This includes the freedom of some people to pen opinions that we may not agree with!
But… frequent visitors to this website may have already identified the frustration that most investment professionals (including us) can experience, given the impact that many media reports can have on some people’s financial decision making – such as changing investment strategies based on fearful news reporting, fake or otherwise.
Background – fake news rises as mainstream media falters
Especially over the last decade or two, technology has disrupted many long-established businesses. Media is no exception.
Just a few short years ago, traditional news outlets including newspapers, magazines, and the evening news was big business, mainly because the funding required to pay for printing presses or television studios and expensive cameras and journalists was so difficult for a newcomer to get. The same funding barriers prevented anyone from obtaining, then passing on, simple information to the masses, such as the weather forecast.
The tables have turned.
Nowadays, establishing your own blog or website can be done for a hundred bucks or less, and anybody with a smartphone and a social media account can have the same reach as a journalist. News is 24/7 and delivered via smartphone app or social media – if we need to know the weather forecast, rather than tune into a radio station or wait patiently for the six o’clock news (as we had to just a decade ago), a smartphone app will tell us instantly. In the face of such technology and innovation, mainstream media remain burdened with their expensive TV studios and whopping newsreader salaries.
Several other matters have also had an impact:
- Journalism is the least trusted profession.
- Polls, analysis, and general reporting from mainstream media outlets have made some consistently incorrect predictions: such as regarding the outcome of the UK’s Brexit referendum, recent Australian elections, or the election of Donald Trump. Some have suggested such predictions represent a disconnect between mainstream media and the silent majority – an unspecified large group of any nation’s population who keep their opinions to themselves. Others have suggested the media’s political bias is to blame. At the very least, examples such as these have led many to question the methods mainstream media outlets use to collect data (such as opinion polls), and the degree of journalistic rigour applied to the raw data.
- The modern world is filled with any number of things competing for our attention on a minute-to-minute basis. This means it takes even more sensational or outright fake headlines and news stories to get us to notice. It is not hard to imagine this trend may be pushing even the most professional and experienced journalists away from ‘proper’ investigative journalism and towards more sensational stories.
- In the build up to elections in both NZ and in the USA, the independence or impartiality of some NZ and global mainstream media companies has been called into question. For example, in response to Covid-19, many NZ media outlets received part of a $50 million government bailout in addition to wage subsidies. In the US, just last week CNN was extensively mocked on social media after televising a label of “Fiery but mostly peaceful protests after police shooting” – with simultaneous live coverage of parts of the US city in question burning in the background, complete with the on-location reporter describing objects being thrown at police, teargas being fired etc. Note: we’re not taking sides here but are pointing out that many people are now openly questioning the biases of mainstream news outlets.
For better or worse, the points above have all accelerated the development of non-mainstream media and sources of information, which may be more inclined towards fake news than mainstream outlets, and in many cases could be more biased.
Why makes fake news – or bad news – get our attention?
Biologically, we’re hard-wired to pay close attention to negative things, so we can avoid them. This is a throwback to evolution, as our cave-based ancestors needed to carefully remember things that might cause them fatal harm: such as poisonous berries, or the regions where predators such as sabre-toothed tigers roamed. Our modern brains still have this programming, which means we pay a lot more attention to negative information than positive information.
The media have known this for a long time. We never see a journalist saying to the camera, “I’m reporting live from a country where a war has not broken out” or “…reporting live from a city that has not been ravished by a hurricane”. As long as bad things have not vanished from the face of the earth, there will always be plenty of incidents and accidents to fill the news, especially when billions of smartphones have turned most of the world’s population into crime reporters and war correspondents.
Crisis is a word much-loved by amateur and professional journalists alike, though it has become so overused it’s starting to lose meaning. The term crisis is now used to describe nearly every newsworthy situation, which might include the climate, Covid-19, poverty, inequality, the housing crisis, and so on. Paying close attention to such anxiety-inducing headlines bemoaning the latest crisis might not only have a negative impact on your overall wellbeing, but could also give you a distorted or pessimistic view of the world, here’s why…
Are things that bad?
The negative nature of news (not just fake news) is that we might all think the world or country is steadily getting worse. In fact, the opposite is true. Consider these facts, which may run contrary to some popularly held beliefs:
- Globally, the number of people living in extreme poverty fell by more than one billion from 1990 to 2015. Even better, since 2018, more than half of the world’s population is considered middle class or wealthier.
- Since 1900 the average global life expectancy at birth has more than doubled. In the last 20 years alone, the global average life expectancy has risen from 66.3 years to 72.6 years. (New Zealand’s is now 82.3 years).
- Since the mid-1950’s, the world has become more and more peaceful. The number and severity of armed conflicts, and number of people killed, has declined.
- The world is becoming more equal – global income inequality has been falling since 2008, and for 20 years before that it had plateaued. NZ’s level of income equality has been stable for the last 30 years by the two most mainstream measures, i.e. it’s not getting worse or better, and NZ remains more equal than most developed countries.
Try telling anyone who’s reading too many real and fake news headlines that humankind is getting healthier, wealthier, less conflicted, and more equal!
What can you do?
Recent events clearly demonstrate the value of high-quality journalism. Unfortunately, it often seems the response of much of the media to these events – mainstream and otherwise – has shown how lacklustre or misleading journalism can play a part in making a bad situation even worse.
Here’s some tips to deal with fake news, and to help deal with some real news too!
- Stay calm. Nobody benefits from media-induced panic buying of items like toilet paper, let alone changing life or financial plans based on fearmongering news reports.
- Keep perspective. Remember, despite whatever bad news the media is peddling today, by nearly all measures the quality of life of humankind is steadily improving. We’re collectively getting healthier, wealthier, and becoming more equal.
- Fact check. A quick google search might be enough to verify most information. At the least, check the author’s sources for accuracy.
- Is it a joke? Sometimes intentionally fake news might just be well-disguised comedy.
- Switch off. Could your overall wellbeing be improved if you paid less attention to anxiety-inducing headlines about the latest crisis?
Follow the tips above and not only will your finances thank you; you’ll probably be a lot happier too.