Why pageview-driven websites succumb to herd-thinking

Stratfor’s David Judson explains why most journalism suffers from herd-thinking:

The fundamental truth of news reporting is that it is constructed atop pre-existing narratives comprising a subject the reader already knows or expects, a description using familiar symbolism often of a moral nature, and a narrative that builds through implicit metaphor from the stories already embedded in our culture and collective consciousness. No writer can, and no writer should, resist these communicative tools.

He then argues that meta-tagging of articles and search engine optimization accelerate the homogenization of reporting into common cultural narratives:

With journalists already predisposed by centuries of convention to converge on stories knitted from a common canon, the marriage of meta-narrative and meta-data simply accelerates to the speed of light the calibration of topic and theme.

This suggests that content providers which measure their success by popularity (the pageviews metric) will inevitably be drawn to reinforcing existing narratives, rather than questioning them. In contrast, Mr. Judson says, “our fundamental value proposition, the reason Stratfor exists, is that we do not always play the media’s game.”

The same is true of investors. They are forced to recognize and avoid herd-thinking, because they live by the metric of investment returns, not pageviews. Investors are constantly scored by the market, unlike journalists who are rarely scored on their predictive accuracy. And investors can only generate abnormal returns with a non-consensus view of a stock, since stock prices embody consensus expectations. This leads to rigorous analysis and a drive to question existing narratives.

I often wonder what would have happened if Seeking Alpha had existed before WorldCom and Enron melted down. The investors who publish on Seeking Alpha would probably have uncovered those frauds, just as they (and not the business journalists) uncovered this.

Perhaps this explains why fundamental analysis of stocks by investors provides more original insight, both investment insight and business insight, than traditional journalism. It’s why Seeking Alpha is widely read by business leaders, not just investors.