Manipulated into Malaise

A potentially under-reported source of “bad economic vibes”

In the lead-up to and aftermath of the 2024 election, commentators have been scratching their heads over the apparent disconnect between broadly positive economic statistics, on the one hand, and dire economic sentiment among the public, on the other. On the eve of the election 46% of Americans rated the economy as Poor, versus 4% calling it Excellent and 21% saying Good, baffling economist-types who point to strong GDP growth, historically low unemployment around 4%, and cooling inflation (below 3% year-over-year). What explains this disconnect?

While clearly the 2021–2023 inflation played a big role, as did precarious gig jobs and angst about being replaced by AI, today I want to focus on another, more insidious factor: marketing and advertisement.

The rise of Big Tech has been largely driven by advertising: the last twenty years has seen order-of-magnitude increases in the ability of companies to collect and analyze data on consumers, then turn that into ruthlessly tested and targeted messages intended, at the end of the day, to convince people to spend more money. Apple, Google, Meta, Microsoft, and hundreds of others representing tens of trillions of dollars of market capitalization, and trillions of dollars of annual revenue, spend endlessly to squeeze out more data, sharpen their targeting algorithms, and secure the most salient channels into users’ brains. They wouldn’t spend on it if it didn’t work.

There is nothing inherently insidious about this. More-targeted advertisement can lead to more-educated consumers: if I have to see a set number of ads a day, I’d prefer if they weren’t for products I don’t need (e.g., pet food if I don’t have a pet, medications for diseases I don’t have, items used for hobbies I’m uninterested in). However, with more channels for ads and more ability to endlessly A-B test and target them, it is unarguable that the balance of power between advertiser and advertisee is greater than it has ever been. Regular people are left using paleolithic wetware and twentieth century education to compete with cutting–edge algorithms run on city-sized data centers.

In this world we find ourselves in, it’s unsurprising that a typical person feels poorer and more economically anxious than they would in a prior decade, even given the same salary and cost of living. When ads and marketing are as brilliantly persuasive as they are now — including things like the subtle impact of influencers and clever schemes like buy-now-pay-later that help hide the true cost of various purchases — of course you will end up spending more than you would have in the absence of this influence. And of course you’ll feel poorer than you would have otherwise when you see your paycheck eaten up by all these subscriptions, installments, and other expenses you were effectively manipulated into making.

In this theory, then, macroeconomic statistics don’t capture Americans’ malaise, in part, because they can’t capture the degree to which manipulative advertising and marketing induce us to spend and consume more, saving less or racking up debt for minimal improvement in quality-of-life.

While there is no easy solution to this problem, knowing is the first and most important step. Understanding that our expectations and desires are under constant target by well-resourced advertisers can help us interrogate those expectations and desires, knocking off some of their persuasive sheen. “I can’t believe I can get this new iPhone for only $40 a month. That new Intelligence feature looks so cool. But… maybe I should pencil out how much $40/mo for 24 months will really impact my budget. And maybe I should take a day to think through when I’d actually use those GenAI features”. It’s a small step, but a powerful one.

Beyond individual action there are certainly societal solutions, but these are beyond my paygrade. Improving financial education in schools, battling junk fees, requiring transparency into sponsored content and the true cost of items all seem directionally right, but reining in the excesses of Big Tech and materially improving nationwide schools both seem like pipe dreams for at least the near future.

This has obviously been a qualitative and vibes-based description of this issue (ironically enough). I hope to have time to get deeper into the statistics and get at least an idea of the order-of-magnitude of the problem sometime soon.