The power of “rags-to-riches” TV

Entertainment can have a powerful effect on changing our minds.

Media is powerful. It shapes our perceptions. It can rewire our brains. It makes us believe things that we may have previously been diametrically opposed to at one time.

Just look at what 24-hour cable news networks have done to some of our loved ones, for instance.

I recently came across some research that hit on this topic in a pretty interesting way. A study called “Entertaining Beliefs in Economic Mobility” from Eunji Kim at Vanderbilt University, published last year, looked at how exposure to “rags-to-riches” TV shows affected their beliefs in upward mobility — or, as we commonly call it, the “American Dream.” Specifically, the paper looked at how audiences of TV shows like “Shark Tank” and “America’s Got Talent” changed their perceptions of upward mobility after watching several episodes, and compared them to a control group:

I find that exposure to rags-to-riches programs increases perceptions of economic
mobility and promotes beliefs that economic success can be attributed to internal, rather than structural, factors. These effects are substantively important: regularly watching six or more rags-to-riches TV shows like Shark Tank is as powerful as having immigrant parents in shaping beliefs in upward mobility. In contrast, neither local economic context nor personal economic insecurity explains much
of the variation in beliefs in upward mobility.

The shifts were fairly substantial, too:

When respondents were limited to two choices— whether they thought that some people are rich because they worked hard or because they were lucky— exposure to merit-based rags-to-riches TV programs had substantial effects: it increased the perception that the rich people are rich because of hard work and talent by around 17.5 percentage points. To put this in context, the partisan gap in the control condition was 19 percentage points. In other words, the treatment effects
were the same size as the gap between Democrats and Republicans.

Of course, it’s difficult to say if these are permanent changes in perception. Some of these people could turn around, watch “The Wolf of Wall Street” or something, and change their opinions once again. People are complicated.

But I did want to share this with you all because it does display just how vulnerable we are to messaging, as subtle as it may be. This is why billions of dollars are spent on ads, programming, and content. There is a substantial percentage of the population that can be easily whipped back and forth in their own beliefs. You’ve probably seen it happen — a lot of people tend to repeat what they hear, even if they don’t understand it.

As for the particulars of this specific paper, having to do with upward mobility and beliefs about the American dream? I think that it does play into the widespread-but-unrealistic expectation that a lot of people harbor, which is that they’ll one day be recognized for the geniuses they are and become rich. People do live out rags-to-riches stories, of course, and we should celebrate the people who pull it off through hard work and determination.

But it may be more common in this country to go from riches to rags — just look at most lottery winners or a good percentage of professional athletes. With that said, the American dream of upward mobility is attainable, albeit probably less attainable than it was a generation or two ago. The powers that be can convince you that it is still very much real and within your grasp, and we, as content consumers, need to be cautious about just how much we’re willing to buy into that idea.

Why good jobs numbers are (currently) bad for the markets

The unemployment rate falls, and the markets freak out. What gives?

Image: Bureau of Labor Statistics

The latest jobs report, released last Friday, showed that the economy added 263,000 jobs in September and that the unemployment rate fell to 3.5%. Usually, that’s good news. It’s a sign of a strong economy.

But lately, good employment figures — that is, monthly unemployment reports that show the economy adding jobs, and keeping the unemployment rate low — have been met with hysteria in the markers. For example, on the day (October 7) that the latest jobs report was released, this happened:

The Dow fell 2.1%
The S&P 500 fell 2.8%
The Nasdaq fell 3.8%

Again, this is a negative reaction to what we should consider positive news. So, what gives? Well, it’s all about the Fed.

The Federal Reserve has two primary tasks (typically called the “dual mandate”): Keep inflation under control, and the unemployment rate low. It’s a push-and-pull relationship to keep the two in check. Lately, inflation has been extremely high, and unemployment has been extremely low — so, the Fed is raising interest rates to try and lower inflation. But rising rates make it more expensive to borrow money, conduct business, etc. Higher costs on businesses often lead to layoffs or fewer jobs. It raises unemployment.

As such, the Fed is trying to balance the two — raising rates while trying to keep unemployment low. But, since unemployment is very low, there is some room to work with. That takes us back to the jobs report. September’s numbers were pretty good, which makes it all but assured that the Fed will raise interest rates again soon, and probably by another 75 basis points, which is significant.

In short, the jobs report sends a signal to the market that costs for businesses will continue to go up, eating into profitability. Accordingly, the markets fall.

Add into all of this the sense of pervasive pessimism about the economy. I think that many companies have gotten way to used to cheap, unsustainable debt over the past 13 years, as interest rates have been at or near zero percent for a good percentage of that time, and it was only a matter of time before this caught up to us. We’ve grown accustomed to super-low borrowing costs, and at some point, they were going to need to come back up. That’s what’s happening now, and it’s a tough adjustment.

That’s why there’s an overriding feeling of pessimism: There’s a new variable in the economic mix now, and it’s higher interest rates. Those higher interest rates are going to change outcomes. It’s all about uncertainty since we don’t know what those new outcomes will be. And when investors and businesses feel uncertain, they act more conservatively and pull their money back.

Another thing to keep in mind about the latest jobs report, too, is that the Fed and other experts have been expecting the unemployment rate to start increasing as interest rates rise, but it hasn’t happened on a significant level yet. But there are signs that things are turning. Consider this, from CBS News:

Layoff announcements spiked in September, according to outplacement firm Challenger, Gray & Christmas. Job cuts last month rose to nearly 30,000, an increase of 46% from August, while the number of companies announcing hiring plans last month fell to the lowest level in more than a decade, the firm said.
"Some cracks are beginning to appear in the labor market. Hiring is slowing and downsizing events are beginning to occur," Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in a statement.

Perhaps October’s jobs report, due out at the beginning of November, will see jobless numbers ticking up? We don’t know. But for now, if your portfolio is taking a hit on the heels of good economic news, it’s because that good news is giving the Fed the green light to continue raising rates — which, given the current inflation numbers, is probably the right course of action.

Numbers, links, and more

91: William Shatner’s age, making him the oldest person to go to space — something that he writes filled him with “overwhelming sadness.” (Variety)
-30%: The fall in Ukraine’s GDP nine months after the war started. (The Kyiv Independent via Twitter)
One acre: The size of the Republic of Molossia, a micronation in Nevada, that apparently exists. (Insider)
“Hedge Fund Moneyball”?: How billionaire Steve Cohen is running the MLB’s New York Mets like a hedge fund. (Bloomberg)
“You know that’s not true…”: Jon Stewart is back and I’ve missed him. (Slate)
Junk fees: The Biden administration is going after “unnecessary hidden fees,” such as airline baggage charges and overdraft fees. (The Guardian)

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Why good jobs numbers are (currently) bad for…