A very basic economic concept is that we really shouldn’t pay all that much attention to what people say – look at what they do instead. This is, in the jargon, worry little about expressed preferences and concentrate on revealed preferences. As with so much economics – the reason being that it’s the study of humans and we humans spend our lives studying other humans – we can say the same thing in colloquial language. Talk’s cheap, actions matter.
So, this means that we can go look at what people do in order to work out what it is that they think important, what interests them. This is useful as of course society is full of people insisting upon what people should be interested in. There’s even a group who will claim to know what people are interested in even if that might not pass a truth test. Our truth test being, well, what do people actually do which is our guide to what they’re interested in?
The Reddit crowd should put its power to better use than bashing hedge funds
Targeting lavish executive pay or ensuring net-zero pledges are met would be good places to start
The fact that these individual investors are not chasing after those pays nor pledges shows that they don;t give a toss about them. Yea, even though the wokerati keep telling them they should, they don’t.
The very fact that they have to tell them they should tells us that they don’t in fact.
This does actually matter in financial markets. It really matters in fact.
I’ve made three suggestions about investing in Boohoo in recent times. You’d have made around 100% on your money if you’d followed the advice.
Boohoo was found to – hmm, alleged to – have people in the Leicester supply chain being paid less than minimum wage. This collapsed the share price as the woke dropped it. I then said that 17 year olds buying £1 bikinis didn’t give a shit about such woke issues. So, buy. The stock gradually went right back up again as it turned out that 17 year olds buying £1 bikinis didn;t give a shit over woke issues. So, I said sell, the special situation is over. Then there was another report of some woke issue – can’t even recall what it was and the stock dropped. So, I said that 17 year olds buying £1 bikinis don’t give a shit. Buy. The stock has gone back up again. Net profit from ignoring woke mantras about what consumers should prefer and concentrating instead on what consumers do prefer – £1 bikinis – is some 100% or so.
Or, as we might put it, there is a reality outside that window. Best to pay attention to it not the groupthink beliefs of those here in the room.