This time it's different: wisdom of crowds vs. western propaganda

The powers-that-be failed spectacularly on two mission-critical fronts

The “Wisdom of Crowds,” a hypothesis popularized by James Surowiecki in his 2005 book of the same title, is among the most fascinating discoveries about human collective psychology. It’s an antithesis to Charles Mackay's "Extraordinary Popular Delusions and the Madness of Crowds." In a nutshell, Surowiecky suggests that under certain conditions, the crowd can converge on truth about some matter or zero in on the most effective solution to a problem more accurately and more reliably than even the best qualified experts. For all who are interested, I summarized two of the most fascinating examples Surowiecky cites in my book "Mastering Uncertainty in Commodities Trading" (free download at link, you’ll find the relevant discussion on pages 58 and 59).

Social media are making us remarkably smart

But in order for the collective to manifest such wisdom, a number of conditions must be satisfied: (1) the flow of information must be decentralized; (2) truthful information must be present within the information universe; (3) there has to be a wide diversity of participants in the discussion, and (4) the participants must not be dependent upon each other in making their judgments.

Modern social media may have created the environment where these conditions are met in a robust way, which radically changes the way we respond to information as a collective. Until not so long ago, information flowed from centralized sources which could easily filter the information that reached the public. For as long as the society depended on the printed word, radio or TV for information, controlling the the narratives was relatively straightforward.

Spontaneous detoxing from Russophobia

The emergence of social media may have upended this old order of things, and the perfect example of this is the public sentiment about the proxy war in Ukraine, which is between Russia and the leading western powers. Over the past two decades, western legacy media have kept tight control over the way Russia and its leadership were being portrayed. Adversarial positioning toward Russia resulted in a consistently negative media coverage.

When Vladimir Pozner commissioned a group of researchers to comb through the archives of the New York Times over a 3-year period from 2015 through 2017 and look up Russia-related articles, they found zero stories that mentioned Russia in any positive context. This suggests that there is a policy in place at the NY Times and the same is probably true of other western media. On a rare occasion when a positive story does escape the watchful eyes of the censors, the story is soon deleted and memory-holed.

Narrative control went turbo-charged last year from the day Russia invaded Ukraine: western powers almost completely purged all Russian sources and applied heavy-handed censorship of pro-Russian views.

In light of all this, one would expect to encounter uniformly negative views about Russia in the west. How else should we perceive a nation with zero redeeming qualities, led by a thuggish kleptocracy under a President who is a former KGB agent? And now that this nation started an unprovoked, illegal aggression of a neighboring sovereign country, we'd expect Russia to arouse nothing but fear, loathing and hostility in the west. However, that’s not what we find. Such sentiments appear to be limited to the mainstream media and public officials, but are not generally shared among the public. 

That didn’t go as planned

While it is true that Russia's invasion of Ukraine caused shock and consternation among people in the west, the initial condemnation of Russia has largely dissipated. I am relatively familiar with the sentiments in my native Croatia, which is a catholic nation that's never been particularly close with Russia. There, probably three out of four people today sympathize with the Russian side. This impression is shared by many people I spoke with there. A number of informal polls I encountered on social media during the recent months corroborate this on a broader basis. Here are three examples that gained a relatively large number of votes on Twitter:

Neither of the three Twitter accounts that conducted these polls appear particularly pro-Russian, so the results should be regarded as generally representative. I encountered another handful of polls, showing results that are similarly in discord with the mainstream narrative. Here’s the most recent example, courtesy of George Galloway’s Mother of All Talk Shows (MOATS) poll on YouTube:

Of course, these are not scientific polls: the respondents could be from anywhere in the world including Russia, and the results might have been influenced by bots (in either direction, in fact). But I received another corroboration from a surprising source.

Populations in NATO nations not so keen on hating Russia

A few weeks ago, a person who works for NATO in one of its member nations wrote me an email. They told me that NATO was keenly monitoring the public sentiment among its member states. Here's what they wrote (word for word, including the emphasis): "I know from my job (military) that Roumanians, Moldovans, Bulgarians, Hungarians, Slovakians, Cypriots and all the Balkans are circa 3 out of 4 and above with Russia. Austrians, Italians, Czechs, Spaniards and French around 2 out of 3."

All these results (except George Galloway’s YouTube poll) predate Seymour Hersh’s recent article which pointed at Biden Administration as the culprits behind last September’s attacks on Nord Stream pipelines. This bombshell would certainly have shifted the public sentiment even further in Russia’s favor.

It really IS different this time!

What we are looking at is a massive narrative control failure by the western powers. Maintaining control of the narrative is not just an auxiliary luxury in politics: it is an essential requirement for successful policy conduct. As such, it justifies an enormous expenditure of resources in formulating the narrative, controlling the information flows and censoring dissenting views. The ruling elites parasites lavishly fund hundreds of think tanks to manufacture the materials to contrive compelling narratives with and manipulate public opinion.

They have perfected this game with over two centuries’ worth of experience and know-how, yet in the last three years we saw them fail spectacularly on two critically important fronts: (1) in their confrontation with Russia and (2) in their attempt to corral us into a dystopian "New Normal" on the back of the Covid 19 pandemic.

The Internet changed everything

They failed because the way we collectively process information, learn and make decisions has changed radically and probably for good. All this should inspire a new faith in humanity and optimism about our future.

These changes could also prove relevant in the domain of investment speculation, because they’ll impact the price discovery process in ways we can’t yet account for. Whatever value metrics were the norm over the recent decades may have become obsolete as a guideposts in the future.

However, markets wll continue to move in trends and with high quality trend following strategies investors will be able to navigate the coming changes and prosper until we can replace the current monetary system with honest money and the whole business of investment speculation becomes unnecessary.

Alex Krainer – @NakedHedgie is the creator of I-System Trend Following and publisher of daily TrendCompass reports. For US investors, we offer an inflation/recession resilient portfolio based on a basket of 30+ financial and commodities markets; in 2022, we significantly outperformed the S&P 500 as well as the 60/40 investment model. This year we launched a sector allocation model based on the 10 S&P sector indices (i.e. energy, real estate, financial, industrial, etc.) For more information, you can drop me a comment or an email to xela.reniark@gmail.com