In case you have not heard, Facebook changed its name to Meta Platforms, doing business as Meta. They are sending a clear message that they believe the future is the “metaverse,” which is basically a virtual reality social media platform. In other words, Mr. Zuckerberg (and his peers) saw the movie The Matrix and thought it was a how-to manual as opposed to a giant warning against the downsides of technology.
How is Meta Platforms doing? The stock is down more than 36 percent and they reported fewer users for the first time in the company’s history. So, is Meta a good investment while the stock is down so much? We don’t think so.
There is a trend in investing over the last few years known as ESG. Longtime readers know how I hate acronyms – their sole purpose, in my opinion, is to make unintelligent people within an industry sound smarter by talking in a language that no one understands. ESG stands for Environment, Social and Governance, the idea being that companies with high ESG scores are more responsible and better citizens than companies with lower scores. This is not the first time this responsible investing idea has come up. It always collapses because in the end, what constitutes responsible behavior is in the eyes of the beholder.
Meta Platforms gets a high ESG rating according to Sustainalytics…but should they? There was a Super Bowl advertisement for the Metaverse, which followed a stuffed dog, formerly someone’s beloved toy, now discarded, lost, and thrown away. Its life was harsh. Someone found it, took it out of the garbage and put virtual reality goggles on it. The dog’s virtual life was wonderful. I believe it was the most twisted, disturbing commercial I have ever seen.
Recently I had a chance to hear a presentation form Dr. Leonard Sax. Dr. Sax has authored several books on parenting and has done extensive research on the effects of technology on children. He cited research published by the American Psychological Association, which tracked depressive episodes experienced by individuals by age group over time. From the early 2000’s through 2017 the number of depressive episodes among adults, people 30 and over, remained stable with no significant change. The older the group, the more stable the data. However, such episodes among adolescents increase 52 percent from 2005 to 2017. Incidents of depression increased 63 percent among young adults ages 18-25. Incidents of serious psychological distress rose 71 percent. The numbers are far worse for girls than for boys. The spike began around 2010.
What happened in 2010 that would cause such a dramatic shift in the mental health of our nation’s youth? Instagram. Coincidence? I think not.
UCLA published a study on TV viewing habits from 1967 to 2017. From 1967 through 1997 the number-one shows on TV all had one thing in common: they emphasized community values of doing the right thing and being a good friend. Between 1997 and 2007 the top shows moved to reality TV, which was all about individual values of fame, fortune, and winning. Doing the right thing would get someone voted off the island.
Today kids don’t watch TV at all, it is YouTube, most of which is people doing anything and everything to get you to hit the like button so they can be famous. Is it any wonder that this shift in emphasis from doing the right thing and being a good friend to grabbing attention for yourself has accompanied higher rates of depression?
Social media started as a way to stay in touch with your real friends, from the real world. According to Dr. Sax’s research, individuals who spend 30 minutes or less a day on social media platforms still use it for that purpose and do not experience the negative mental health results. However, those who spend more time are primarily using it as a performance platform. They share posts that make their lives seem better than they really are, and then compare their lies to those of their friends. Only, while they know their posts are mostly an act, they fail to recognize that this is true for their friends as well.
Meta Platforms knows all of this and has for some time. Frances Haugen, a former data scientist for the company, blew the whistle on them last year. What is Facebook doing with all of this evidence of the harm they have done? Changing their name to Meta, hoping you will simply forget about having a real life all together and volunteer to plug your self into your Matrix pod.
We don’t subscribe to the ESG fad for investing. We do, however, believe that all prudent investing is done from the bottom-up and that we should act as owners of companies and not traders of stocks. Meta gets a high ESG rating because, in truth, ESG has more to do with a company’s politics than anything else. I do not believe a company whose product is primarily responsible for a 71 percent increase in serious psychological distress in the lives of young adults is being socially responsible; at least that is my perspective.
Warm regards,
Chuck Osborne, CFA
Disclaimer: Neither Mr. Osborne nor Iron Capital owns shares in Meta Platforms stock in their personal accounts or in the accounts of clients. This Perspective was for educational purposes only and not a recommendation for investing.
