15 May The Return of Truthiness*
The Return of Truthiness
Coined by Stephen Colbert, Truthiness “is the belief or assertion that a particular statement is true based on the intuition or perceptions of some individual or individuals without regard to evidence, logic, intellectual examination or facts.”
Examples of Truthiness abound in modern culture, in business, in entertainment, in social media … and of course in politics. The current endemic level of Truthiness is corrosive. It undercuts social relationships. It subverts democracy. (See “Does Truth Matter?” in the March 8th TLR.) It breeds violence. It has led to military conflicts (having an unsettling resonance with religious and racial wars).
The poster-child of business Truthiness is Elon Musk. He revels in exaggeration, pushing the limits of truth to … lying outlandish extremes. Everything he says garners attention and leads to speculation that maybe, possibly, all most at least some of what he’s saying is true … even though at times it’s pure hyperbole. As a result, it becomes difficult to separate Truth from falsehood, fact from fiction, purposeful deceit from simple promotion. The effect of so much ambiguity is that Musk hopes that almost nothing Musk says can be held against him. After all, based on his outlandish statements, “everyone must know” that much of what he says is for effect. His words and actions send the message that buyers need to be wary – Caveat Emptor. Unfortunately, all too often Truthiness is mistaken for Truth.
It’s not clear whether Musk came up with his Truthiness strategy independently or by emulating the success of politicians. Perhaps his first testing-of-the-waters was his Tweet in April 2018 announcing that “Tesla has gone completely and totally bankrupt.” It passed without challenge by the SEC and the media.
Musk used to be Tesla’s Chairman as well as its CEO, but was forced to resign his Chairmanship when he committed securities fraud by Tweeting that he had secured financing to take Tesla private. (See the February 27thTLR.) That crossed a legal line. Laws against lying exist in the securities world; comparable laws are absent on social media and in politics. Musk was fined $20 million and agreed that he would not Tweet without legal pre-clearance. In a subsequent 60 Minutes interview, however, he said that he was not going to abide by any such pre-clearing requirement, meaning that he felt himself free to indulge in Truthiness whenever the mood struck. He then violated the SEC settlement agreement by Tweeting that Tesla would be producing 500,000 cars in 2019 when he really should have said that Tesla has a production goal of 500,000 cars in 2020. That misled Tesla investors. Other examples of Musk’s pursuit of Truthiness include a recent “Tesla is going to develop a quiet, electric leafblower [which will] be sentient, of course” as well as an earlier Tweet that Tesla’s new Roadster will have an optional rocket-thruster addition: “[The] new Tesla Roadster will include ~10 small rocket thrusters [that will] dramatically improve acceleration, top speed, braking & cornering. Maybe they will even allow a Tesla to fly….” Of course they will!
Apparently worn down by the sheer number of promotional Musk Tweets and by excellent lawyering by Musk’s attorneys, the SEC has backed off and entered into a further settlement agreement that attempts to detail actions by Musk that in the future will result in SEC enforcement. The new standard appears to provide that anything he says short of a provable falsehood that materially moves the price of Tesla’s stock will result in an SEC pass. Perhaps this is an appropriate legal line-drawing, at least for Elon Musk though doubtfully for others who have a lower public profile. Time will tell.
Elon Musk may be an outlier today, but the risk is that Truthiness becomes ever more acceptable, that it becomes an endemic epidemic, that Truth ceases to be valued. Although there have always been corporate leaders who materially mislead investors in order to enhance their compensation position rather than benefit shareholders and enhance corporate value, there also are those whose honest objective is to benefit their company and increase long-term shareholder value. They neither lie nor obfuscate. That is the quality of leadership that the markets most reward … as should society in general.
Warren Buffett is the CEO of Berkshire Hathaway, the most esteemed investor of his generation, universally respected as the Oracle of Omaha. He tells the Truth. Buffett earlier this year blamed losses disclosed in Berkshire Hathaway’s financial statements on a change made to generally accepted accounting principles (GAAP) that requires public companies to mark investment securities to their market prices rather than to the prices originally paid for those securities – that is, to mark securities to their actual values rather than to historical values that would preclude showing an investment loss until the losing securities were sold. For Buffett, complying with GAAP “would produce … ÔÇÿwild and capricious swings in [BH’s] bottom line.’” That’s true. Marking securities to their market prices would naturally cause swings to a company’s bottom line, especially when the loss is as large as BH’s loss on its Kraft Heinz investment. The fact is that stocks sometimes lose value. That causes a public company like BH, which invests the bulk of its assets in other companies, to also lose value … which is what financial statements are intended to show. That’s why GAAP requires mark-to-market accounting – to accurately reflect a company’s value. However, Buffett (and BH’s shareholders) has always viewed BH as a long-term investment and treated its investments, in turn, as long-term value plays. The problem for BH is that it is a publicly-traded insurance company engaging in a private equity fund-like business. To Buffett’s credit, he is responsible for having created this unique form of public company, one that reasonably should be treated differently from virtually all other public companies. But no exceptions have been made to GAAP reporting for insurance companies like BH. The revised GAAP rules require it to report its value in the same way as other public companies. Hence, Buffett’s efforts to explain the hit to BH’s bottom line. In doing so, Buffett spoke Truth in stark contrast to Musk.
Bill Maher in 2015 adopted a satirical version of Truthiness when he began a segment entitled “I Don’t Know it for a Fact, I Just Know it’s True.” His routines highlight how easy it is to ignore fact when asserting a plausible personal opinion based on photos or rumors. Assertion of a plausible opinion is especially potent when founded on fear. Witness the Truthiness-fear that led to the anti-immunization, anti-measles vaccine campaign. Truthiness not only can subvert. It can kill.
Television news today is about entertainment. Truthiness entertains while fact-checking is both old-fashioned and expensive. It’s been largely relegated to the eggheads at Public Broadcasting who apparently have a fondness for Truth. The major networks now have the data to determine who their audiences are and what they want to hear … and they sometimes cite “facts” to play to (and avoid alienating) those audiences … an intentional slide down the slope of Truthiness.
Truthiness owes its genesis to politicians. In coining the term in 2005, Colbert said: “It used to be [that] everyone was entitled to their own opinion, but not their own facts. But that’s not the case anymore. Facts matter not at all. Perception is everything. It’s certainty. People love [President George W. Bush] because he’s certain of his choices as a leader, even if the facts that back him up don’t seem to exist. It’s the fact that he’s certain that is very appealing…. I really feel a dichotomy in the American populace. What is important? What you want to be true, or what is true?”
It’s that dichotomy that drives reactions and choices, reactions and choices that divide.
Voters generally don’t parse facts. They believe in the politician who says what they want to hear, believe in alleged facts they want to believe, and don’t believe hard facts that might challenge their core beliefs.
As an example, no one wants to hear that their tax cuts actually create deficits. Instead, voters are told that tax cuts pay for themselves – they don’t – and that deficits will go away on their own – they won’t. And yet many voters continue to believe those falsehoods … because they want to believe.
Politicians want to spend more money on pet projects, so Modern Monetary Theory has been rolled out to justify the printing of dollars to pay for those projects. MMT, however, is not a “theory.” It’s an untested hypothesis with no historical precedents. Politicians have decided to play with voters’ tax dollars in order to maximize their chances of re-election … and voters may allow them to do so. Why? Because they want to believe that dollars can be printed to solve all economic problems.
President Trump says that he didn’t lose the popular vote in 2016. Instead, he says that voter fraud was rampant and that millions of votes were fraudulent. That isn’t true, but many of those who voted for him want to believe that they are part of a majority, and they therefore believe that voting fraud must have been rampant.
Similarly, as explained in the May 3rd and May 13thTLRs, it’s not true that “Tariff wars are good, and they pay for themselves.” Tariff wars are bad for everyone.
Although Truthiness has become almost acceptable in parts of the business, social, and political worlds, Truthiness is not good for business, not good for society, not good for politics, and not good for America. There is a moral – as well as a consequential – bright-line between lies and Truth. In politics, there have been the FDRs and Reagans who at times felt it necessary – in America’s interest – to minimize gloss over problems by putting the best face on difficult, sometimes critical, situations, and then there have been the Nixons and Bill Clintons who told outright lies for their own benefit without concern for the impact on America or Americans. The first is a quality and the second a vice. One benefits the country, its Rule of Law and its institutions while the other undermines it and corrodes confidence in justice and the workings of government. There’s both a moral and societal difference between the two.
In politics, business and news/entertainment, liars those who fabricate facts have stopped caring whether they get caught. Their investors, viewers, and constituents seemingly don’t care … so why should they? Each investor, viewer, and constituent wants to believe in his/her own reality and is able to share that reality with similarly-minded others, either through a favored media outlet or on social media. The problem is that … there is a reality. There is Truth and, while there often is no certainly, ambiguity creates an appropriate forum for discussion. Truthiness not only promotes ignorance, it creates the narrowest of separate realities, preventing people who necessarily have some common interests from finding common ground. By encouraging falsehoods and false beliefs, Truthiness nourishes the greatest of all threats to democracy – irreconcilable divisiveness.
Finally (from a good friend)
*┬® Copyright 2019 by William Natbony. All rights reserved.