This is the first crisis mediated by Internet Word of Mouth
The current financial crisis provides a rare opportunity to study Word of Mouth under crisis conditions. It turns out that Word of Mouth works differently during a crisis, paradoxically providing both powerful resources and dangerous pitfalls. It can be a powerful tool to solve problems, but can also BE the problem. At such times, WOM appears in its extremes -- at its best and worst. It can rear its head in its ugliest forms: rumor, smear campaigns, political correctness, dogmatic suppression of questions, and -- at its extreme -- self-feeding panic and mob rule. It can also provide access to leaders and experts who emerge in times of crisis to lead us to rise to the occasion.
It's interesting to watch almost everyone get the current financial crisis wrong, watching the spread of misinformation, the lessening of the ability to listen, the growing list of “That Which Must Not be Questioned” and the elevation of nonsense into dogma in a crisis, i.e. a perceived necessity to act immediately. Fascinating. Instructive. Scary.
WOM more important, yet quality lowers
In periods of extreme uncertainty coupled with an urgent necessity to act, WOM becomes more important, but of much lower quality. False information spreads. Simple questions don't get asked by our designated questioners (the press). Simple questions like, “yes, but what made THAT possible, encouraged it, blinded people to the problems, etc.” Simple explanations are very appealing in a crisis. We have to act NOW. No one wants to ask the deeper questions out of fear of delaying necessary action, looking stupid or getting overwhelmed with too much confusing information.
Word of mouth saves time, which is just what we need in a crisis. One of the functions of WOM is to piggyback on others' knowledge and experience, thereby saving us time, effort, uncertainty and risk. That may be fine for buying a product, but it's not so good when the matter at hand is extremely important, urgent and complex, needing careful examination.
The good news
However, there is a silver lining to this. Dissenting opinions and evidence are getting passed around. For instance, I've seen a NY Times article predicting the crisis in 1999 being passed around and laying it at the feet of Fannie Mae's -- and other GSEs -- granting of more mortgages to people who obviously couldn't repay. Some people are questioning why people would do such a thing, and not accepting “greed” as the “obvious” answer. (Wouldn't a greedy person do the opposite?) There have been many mentions of the Community Reinvestment Act and the “mark to market” requirements (regulation, not deregulation) that are also at the root of the situation.
Anyone who wants to access WOM from knowledgeable people can now do so, unlike in previous crises. Wikipedia, perhaps the most amazing result of the WOM revolution, is surprisingly accurate, clear and concise in describing these controversial issues, objectively. For instance, the “mark to market” issue, while the TV pundits say it's too difficult for us to understand, is a simple concept that Wikipedia easily explains.
While most people are analyzing the symptoms of the problem, some wiser people are asking, "What are the root causes and what really allowed these causes to happen?" "Yes, mortgage lenders gave bad mortgages for immediate gain. But, was it deregulation or regulation and government interference in the economy (such as the Community Reinvestment Act, Fannie, lowering interest rates, etc.) that made it all possible?" Actively seek the right WOM.
Never before has the meritocracy of ideas – its present form is the blogosphere – been put to such an extreme test.
- When the conventional WOM is saying that something is too complicated for you to understand and that we have to act now on the “obvious,” run for the hills holding your wallet. Actually, run for Google and read, read, read -- not just the first few entries. You will eventually find entries that are crystal clear and easily understandable.
- We can now question what we hear, and get answers. In other words, we can actively seek WOM. It is no longer rare for us to run into a knowledgeable person. Our problem is now the opposite: an overabundance of them to choose from.
- This causes initial overload, due to the dramatically increased access to word of mouth from a variety of media.
- As James Thurber said, "It's more important to know some of the questions than all of the answers."
- Inconvenient Questions, coupled with the ability to shop for the right word of mouth, might just save us.
- We can -- and should -- shop for our Word of Mouth carefully, critically and thoughtfully.
- The age of being able to manipulate and control information is over, but is still operative in the short run when people suspend their critical faculties and abandon reason during an emergency..
- WOM should never replace thinking -- except when we allow it to, which is sometimes desirable, as in, "What laundry detergent works best for you?"
- Professional Word of Mouthers, such as TV pundits, are often pushing a hidden agenda or hiding the fact that they don't have a clue. This is particularly true of reporters. Reporters report, that is, they repeat what at least two people say. They call this corroboration. Criminals are found guilty on the basis of corroborating witnesses. But so did “witches” get burned at the stake with the same corroboration. Reporters hunt with the pack, and in is only a very small handful of members that set the direction of a herd.
- WOM is inherently self-correcting under conditions of transparency, high feedback, reward for success and/or penalty for failure and a high standard for evidence. Wikipedia is a shining example. But this self-correction can be shut down by “The Sky is Falling” urgency and desperation, by telling us that the situation is too arcane for us to understand, by PC dogma that forbids questioning, by intimidation, by distraction (such as the real unfairness of things that don't make a difference, such as executive salaries and immunizing people from their poor judgement), by illusions masquerading as facts, by wishful thinking and by Political Correctness and other dogma (unquestionable beliefs).
- WOM can accelerate the spreading of speculation, misinformation and panic -- and make it more credible before it makes it less credible.
- WOM in this Information Age increases the chances that the small number of people who correctly understand the situation can eventually be heard.
- Beware of WOM that attempts to complicate.
- Beware of WOM that oversimplifies.
- People can sell almost anything in a neatly packaged story. President Bush's story about the necessity for the bailout was almost identical in structure to his speech about the necessity for invading Iraq, which I suspectei at the time, but which was frighteningly driven home in a split screen episode on The Daily Show.
Eventually, even under conditions toxic to the truth, some kid will step forward and say “The Emperor has no Clothes.” That kid is invariably a pain in the ass who increases our discomfort and who should therefore be encouraged and treasured.