Technology is impacting the world in new ways. One of the ways in which it is impacting every person on earth is through its use in telling stories in the political arena.  

The first real success story of using technology to influence an election outcome was Barack Obama back in 2008. His famous campaign slogan “yes we can!” quickly spread on the internet and on social media. At the time, few realised that this was the start of the global technological political revolution. Fast forward 8 years to 2016 when Donald Trump got elected. His campaign managed to obtain access to Facebook users’ personal data and used this data to influence voters, resulting in a surprise victory for the U.S. President. 

Consider how increasingly effective technology has become in influencing voter perceptions:

2008 – Barack Obama Campaign                  

Used Facebook to broadly communicate policies, campaign slogan and creative advertisements (“the need for change”)

2016 – Donald Trump Campaign                  

Used personal data of Facebook users to create specific ads to target specific people in specific counties in swing States

2017 – 2019 – Donald Trump                        

Uses Twitter to directly communicate beliefs to voter base, adapt policies based on comments, directly communicates updates

2019 + – Republicans/Democrats & Each Party’s Supporters?             

Uses deepfake videos of opponents to influence public perception, also called ‘’synthetic media’’?

What is deepfake?

Deepfake video is hyper-realistic video made using artificial intelligence technology. Deepfakes can be so convincing it can be difficult to determine what has been manipulated and what has not. It is currently being used to superimpose faces of celebrities on other celebrities.

At the moment, it is not that difficult to spot the subtle differences between a deepfake video and an original video. The human brain is pretty good at distinguishing a real face from a fake face. It is, however, concerning that the nuances that give away that a video is deepfake are becoming less pronounced by the day. Consider the following video clip where Tom Cruise’s face is superimposed in bursts onto comedian Bill Hader’s face as he tells a story about Tom Cruise (from 0:50 in the video) (www.mashable.com/video/bill-hader-tom-cruise-deepfake/).

Clearly, the technology is evolving rapidly. There is a massive opportunity for developing software that could spot deepfake videos. Some even suggest that there should be a global authentication “watermark” for original video content.

The exponential growth rate in technology means that stories can be communicated ever more effectively, but telling stories to justify actions and beliefs is nothing new. Consider the below table. It shows the top 10 stocks by market capitalisation at the end of each decade, starting in 1980:

”Fake it ’till you make it” is not an investment strategy. Be wary of investment stories.

Most of the top 10 companies in each decade fall away the following decade. Each decade has its own prominent beliefs, which are typically based on the prevailing story of the day. The most recent prominent belief to justify company valuation is that the U.S equity market will continue to power ahead, regardless of valuation, and that the major tech companies, thanks to being near monopolies, will deliver the growth to sustain the high valuations being placed on them.

So whilst the human brain is pretty good at spotting a fake face from a real face it is not as good when it comes to spotting the differences between fundamental company valuation and a story. Clearly, the political arena in the U.S. has shown how easy it has become to fool voters. Make no mistake, investors are just as easily fooled.

Any fund manager who has had an underweight to the U.S. during the last couple of years has underperformed. In particular, those managers that follow a value-based approach and who did not buy into the U.S. technology monopoly story. Looking at the facts of company valuation and avoiding buying into unrealistic stories, means that value-based managers have effectively managed the risk of our investors. As the prevailing story fades and valuation starts to trump unrealistic earnings expectations, we should once again start to see good quality value-based managers, like Orbis and Contrarius, deliver good long-term risk adjusted returns.  

As always, we welcome any questions, comments or queries you may have.