The Age of Authenticity

How next-gen investors and voters will view the world

In my last article I mentioned how everything is a valuation, and that valuations are reaching all time highs as the underwriting of each security had prebuilt in decades of future revenue into the current markup. I also explained how that roughly correlated/contributed to inflation. What I did not get into, because it would be a massive call to make, is the potential for a market crash, when everything gets re-evaluated and brought back down to earth. A microcosm would be $PTON stock spiking during the beginning of quarantine (when everyone apparently assumed the quarantine would last forever), and then “crashing” or coming back to earth when things opened back up and people were allowed to go outside and ride actual bikes and stuff. That really has more to do with social psychology and group-think around the pumping of a stock vs aggregation of thoughtful individual valuations, but it still offers a tangential peek at market dynamics when investors get “too far over their skis” in chasing growth.

I bring up that context because I have been thinking about the next generation of investors, entrepreneurs, content creators, politicians, voters, and citizens, and how they are going to make decisions in society. Or more precisely, Gen-Z and beyond, and how they are going to value things in the coming decades. I think there are some early tell-tale signs. It is a sharp contrast of current market dynamics, but on a larger time scale it is the organic progression of how Boomers, Gen-X, and Millennials have evolved through the political/economic spectrum.

Everyone has seen the basic two-axis political compass diagram in which Social and Economic issues are laid against degrees of government involvement. And, I think everyone would agree that individual politics are much, much more multidimensional than can be represented so simplistically. The past decade has seen political party agnosticism turn to tribalism, and in my estimation will almost assuredly shatter into what I will call “fractured collectivism”. This is where we all realize that political issues are not binary, they are more like a menu where you can pick and choose, and even then you will sometimes need the chef to tweak an ingredient or two. Whether this morphs into something like a British Parliament with upwards of 10+ political parties, or something more modern and digital, one thing is going to be certain: people are going to gravitate towards the representatives that correlate most highly with their values (as one does in a democracy), and be less likely to settle for tradeoffs (as one currently must in America). If a certain subset of collective values is not being represented, there is going to be someone that rises out of the assemblage to meet the needs of the people. This is going to happen organically through the multiplication of two factors: personal media leverage, and authenticity.

Personal media leverage is obvious. It already has the colloquialism of “Social”, and anyone materially involved in growing business of any kind knows its value. If you made any money on the internet selling anything in the past decade and a half, there is almost a 100% chance that you ran Facebook ads. I will not diverge here and give my thoughts on the future of digital marketing (hint: PII, Big Tech, and privacy issues), but the fact of the matter is that there is a growing demand for User Generated Content (UGC) in the Gen-Z world that has been born out of the Millennial Influencer sphere. As Big Tech clashes with cookie deprecation and privacy issues (see: iOS 14.5 update), the cost of digital ads is increasing, but even before that happened, marketers were shifting dollars to influencers because the ROI was higher. People love a good testimonial, but even more they love to be represented, to see themselves in another, but it all hinges on one thing: authenticity.

Humans are insanely bright and perceptive organisms. Even some of the dumbest people you know are highly capable of seeing through bullshit in astonishing ways. The older generations love to harp on our naivete, and there is of course some truth to the negative effects of too much coddling and participation trophies, but I am an eternal optimist, and I tend to take the macro perspective on most things, which requires zooming out on human evolution. If we believe that we, as a species, improve with each generation, you have to assume that there are a multitude of things that our progeny are going to do better than us. And the most glaring difference between how Gen-Z is growing up vs any other generation before it is how they were born into the age of Social Media. As a Millennial myself, I inherently understand computers and the internet better than my elders. It is inborn of me. I didn’t help build the internet, it is in my blood. Thus I understand it in a much more metaphysical way. The next generation of humans is going to be like that when analyzing their human counterparts. Think about the evolution of Social Media in general. Facebook to Instagram to TikTok. I am leaving out Snapchat and Twitter because those are sort of side-paths that exist in parallel. Facebook started out where you had to be in college to join, and its ongoing unique value proposition is that it is connecting you with people you know. Facebook is like brick and mortar, it is the concrete groups of real world people of whom their identities are mostly verified. Instagram evolved into a much more open network of sharing your life with the broader society. “Insta-famous” became a term, and the incentives of gaining likes and followers promoted behavior that skewed heavily inauthentic. Networking was still contingent upon who you followed, and who you followed followed, which meant the competition pool for engagement was still somewhat limited. (Remember, this is all monetized and we are competing for $ and influence here). But the general acknowledgement of the “Instagram vs reality” meme is ubiquitous, plus, you have to be peripherally aware of someone’s existence in order to follow/engage/be influenced by them. Then along comes TikTok, and you can say what you want about it being a Chinese app and the data concerns about our children’s viewing habits being owned by a competing economic superpower (the concerns are valid in my opinion), but the power of the algorithm is undeniable. If the goal is to leverage your personality to become famous, which for the most part it is (“TikTok famous” has replaced “Insta-famous”), then TikTok reigns supreme. Because the attention span of each platform has gotten shorter and shorter, TT can use short bursts of attention to determine what is or is not interesting to a person faster than the others. And thus can “test” much more content to many more people in hope of finding organic engagement. So as a discovery mechanism for finding UGC and people you generally find funny or vibe with, TT has no existing equal.

So what does this have to do with authenticity? Well, like a professional poker player who has played many hands over the years, the amount of reps you see allows you to develop a 6th sense of sorts. Pro poker players will often supplement in-person games with online ones, just because the sheer volume of hands that you can run through is so much greater. Each subsequent generation of human has seen and interacted with an exponentially greater number of other humans than the generation before it, when you factor in online interactions. Their bullshit detectors become more and more refined, and multidimensional personalities become more commonplace than anomaly. They have seen their immediate elders strain and exert effort to be liked online, and it comes off as unappealing and exhausting. So when an 80 year old man gets on stage running for President and in a 5 minute response to a simple question is unable to articulate an actual position, they see right through it and become disengaged. They see it for what is it: years of conformity leading to a place where you are too afraid to have an actual opinion for fear that you will alienate your caucus/base/followers/etc. Inauthenticity is bad for business.

The next generation of humans will be more cognizant of differences, more accepting of change, more easily able to hold conflicting ideas in their head. When you can leverage your personal media by being your true nuanced self, it is so much more powerful than being thrown into a binary decision (there is also probably some thematic commonality with gender roles here that I am not qualified to articulate on). The trend of digital marketing replacing traditional advertising, influencer spend replacing traditional digital marketing, UGC replacing traditional influencer marketing, and TikTok elevating the most authentic and relatable creators ushering in a new “creator economy”, the future of societal influence is being telegraphed plain as day, just as the future of the digital business is with web3.

Whoopty do, what does it all mean, Basil?

Well, going back to the original context of valuations that look 10 years out, and our current 4 quadrant system of measuring the political spectrum on Social/Economic axes, I posit that there will be a new way of valuing both societal and economic ventures in the future. I don’t think this is revolutionary because I do think that this is already happening in many instances such as cause marketing or $TSLA stock, but when we talk about macro-market forces and incentives, I do not think that these are currently the main drivers of the economy. Things are valued in Net Present Value where future cash flows of investments are discounted back to today’s money in a “what does this mean for me now” kind of way. Likewise, politicians will prey on the current events that spark controversy to remain in the spotlight for tonight’s evening news, completely ignoring the relevance of a year, or 10 years from now.

The Age of Authenticity decrees that a person’s (or company’s) underlying beliefs (or product) must be inherently true to themselves in order to garner support (or investment). Too many things get pumped and dumped in the vein of immediate relevancy, enriching and empowering the wrong people for the wrong reasons. The stamp of authenticity is like a promise, like “we hold these truths to be self-evident”, that I am who I say I am, and in 10 years my fundamental values will not have changed, because the values I hold today are complex and calculated and nuanced enough that they are designed to stand the test of time. It is perfectly fine (and in fact admirable) to change your mind on issues, but things like integrity and compassion are not the sort of thing you waffle on. It’s not about “what does this mean for me now” it is about “what does this mean for us later”. It’s a simple change in the dynamic of the socio-economic valuation and power structure, but it is going to be fundamental, and pervasive, and macro. So, if you want to run for office in 2030, you are going to have to think about how your platform will hold up in 2050. And if you want to invest in a company in 2022, you are going to have to think (really think) about what this company is going to be doing in 2042. Because there is a lot of bullshit out there, and people are not going to stand for it, vote for it, or allocate their money towards it.