Am I Being Informed or Manipulated?
I believe the majority of the financial info we get from the news is geared toward sensationalism, instead of accuracy or usefulness. I even think it is manipulative.
There is a negotiating technique called “anchoring” that car salesmen and HR people use when discussing “price.” It’s the idea that once a number has been thrown out, the other party will negotiate around that “anchor number.” For example, if a car salesman says the car is worth $20K (since he’s the expert), we feel like we got a good deal if we can get it for $18K. Similarly, if we are negotiating a salary and the HR rep offers $65K, we feel like we made a good call if we negotiate to $75K.
But what if the “anchor number” is crap? Studies have shown this usually does not matter. Unless both parties have researched and created their own “anchor,” then one will be subject to manipulation. The news is using this technique a lot lately.
Example 1) “Bonuses on Wall Street were $18.6B in 2008. This was a 44% decrease from $32.6B in 2007, despite receiving federal money.” That statistic doesn’t tell me anything, but it’s designed to make think Wall Street is greedy. I mean, Pres. Obama called it “shameful.” How about a comparison to pre-credit/real estate bubble bonuses? Say 2002 or 2003?
Example 2) “Crude prices have fallen 72% from their high in July 08 of $145 a barrel.” What ever happened to throwing out the outlier or anomaly in your data? How about you compare gas prices to what they were a few years ago before the huge, temporary increase?
Example 3) “It’s a great time to buy. Home prices have dropped 4% this year.” If we are ending a real estate bubble, shouldn’t we want a comparison to pre-bubble 2000 prices? The way realtors are selling houses, every person will get a good deal this year because prices have dropped from their inflated, over-valued, non-appraisal supported amounts? Right?
Maybe it’s not an attempt to manipulate, it’s just laziness.
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