By |Published On: December 8th, 2015|Categories: Interviews, Behavioral Finance|

A critical element of being a good investor is understanding human behavior. In this piece we take our focus away from quantitative finance and focus on understanding the secrets of social influence. And while this piece may not appear applicable to finance, we think it is directly related. How do we source our investment ideas? Why do we buy one stock over another? Facebook dominated myspace–why?

Academic research has been exploring the topic for many years. Recently, Wes and colleagues, have published papers here and here on the subject of social stock-picking websites and stock performance. Older research articles by Jeremy Stein (here and here) and Sophia Shive (here) highlight that social interactions likely matter when it comes to financial decision-making.

Back in March, we did a book review on “Contagious: Why Things Catch On,” written by local Wharton Professor, Jonah Berger. While it is based on serious academic research around social sharing, Berger delivers the material in a lively, provocative style, reminiscent of another non-traditional favorite of ours, Freakonomics. FYI, Jonah’s book is great if you haven’t had a chance to read it.

We also managed to tie in with the lead editor at Digg, a large social media website. How’d that happen? Well, in short, social influence. When I was working on my MBA at Wharton, I was friendly with John Borthwick, who founded start-up studio, Betaworks. John is currently the CEO of a portfolio company called Digg, a popular news aggregator and social networking site. Wes and I were able to meet up with John at his offices in New York a few weeks ago, and he gave us a tour of Betaworks and Digg. (side note: If you are a start-up looking for a good growth partner with a phenomenal cafeteria, you should pay them a visit!)

I told John about Professor Berger’s work, and suggested we run a follow-on interview with Digg — with some input from Professor Berger, who agreed to offer some commentary — to explore the overlap between Professor Berger’s work and how Digg thinks about the world. John was kind enough to put me in touch with Anna Dubenko, who is the Editorial Director at Digg. Below is a transcript of our phone conversation along with some comments from Professor Berger (apologies to Anna if it’s not verbatim – any poor phrasing is probably due to my poor note taking skills).

AA: Hi Anna, and thanks for speaking with us. Wharton professor Jonah Berger has done research suggesting that certain characteristics, such as whether a story has “STEPPS,” i.e., elements of Social currency, Triggers, Emotion, Public availability, Practical value, or a good Story, can drive social sharing. Does Digg focus systematically on these criteria when selecting stories?

ANNA: Hi, thanks for having me. Yes, these certainly are familiar. Just looking them over, I would say that on the question of practical value, we find that while it “clicks well,” it doesn’t always drive social sharing. For instance, people may be interested in a Youtube video on how to cook a Thanksgiving dinner, and so we might highlight this around Thanksgiving, but it doesn’t tend to share that well. Maybe the research disagrees! But that’s what we’ve found in our business. And certainly when we curate stories we focus on publishers who capitalize on these elements.

Emotion is a big one for us. For instance, often capitalizes on so-called “affective” sharing, such as “feel-good” stories, and others motivated by emotions. Also,, which has a progressive political agenda and targets millennials, often leverages emotion, including with what we would call “outrage sharing.” These might be examples of self-identified emotional sharing.

JONAH: People often think humor is the biggest emotional driver of online sharing, but other high arousal emotions like anger are just as important.  And while anger and humor might seem quite different they’re actually very similar.  Both activate us to take actions, and as a result, to share.

AA: I haven’t heard “outrage sharing” before, but why not? Professor Berger writes about how emotions and physiological arousal can drive activation and mobilization and contribute to sharing and social transmission. Can you tell us more about how Digg thinks about the emotions that certain stories and content can generate in its users?

ANNA: Well first, we’re not trying to manipulate. So for example, we try not to deal in “cheap” emotions, such as nostalgia, or “self-righteous” sharing. We try to be more cerebral, and less from the gut. We try to be fact-based, and not overplay the emotional aspects. We want to avoid trading on the emotion to drive traffic, like a tabloid or something. We think our users are savvy enough not to fall for being manipulated in this way.

Along these lines, we think if you go overboard on the emotions, you might get the first click but you erode user trust if you present every story as an emotional experience. Emotions are effective in terms of motivating sharing, but you have to be circumspect in how you use them.

JONAH: Definitely agree with this.  The current focus on views has encouraged clickbait over substantive content.  Smart content creators are realizing that tricking people to click isn’t the answer.  We need to create engaging content that encourages people to read rather than just click, skim, and move on.

ANNA: Also, in our editorial policy we have chosen to lean more positive. For instance, we like the idea of awe, of marveling at things. Videos of people who are good at what they do. Positive images. Positive affects. That’s our bread and butter. We want Digg users to feel good about spending time on Digg.

AA: Sure, professor Berger specifically highlighted “awe” in his book as a big driver of sharing. It makes sense that you want people to feel good, but what is the intersection between feeling good and something that is viral? Do shared things usually make us feel good?

ANNA: When I say “feel good,” I also mean in the sense of how “a spoonful of sugar” helps the medicine go down. So maybe there’s some not-so-good news, like you might have headline about an earthquake or something, but then we’ll also feature lighter fare.

Our users are people who read hard-core news and long-form journalism. Serious news, with gravitas. But we recognize that the lighter side is what people are going to share. Maybe it’s more about the image of yourself you want to project for yourself.

JONAH: This is exactly what Social Currency is all about.  Just like what we drive and what we wear, what we talk about and share is a signal of who we are. So we share things to communicate desired images to others.

AA: It seems Digg is really at the forefront of the move away from broadcast media and towards networked media. But as you seem to imply, although news informs people, can shape their self-image, and help them feel good about themselves, news doesn’t share well. People prefer salacious stories, like for instance those that activate their emotions. Can you talk more about that? How does Digg manage the tension between hard news and the salacious?

ANNA: Well, for instance, it’s often search that drives our thinking, and we want to give people what they’re looking for. There’s something innately compelling about a story, if maybe not salacious. So there’s that side of the news world. Search and social chatter that is becoming or driving news. We want to fill that gap, but with more newsworthy pieces.

So we ask: who’s doing a good job explaining? We take the shared stuff and try to turn into it into more newsworthy material. We’ll try to use reputable sites, and give a “newsified” version of a story.

An example would be some new evidence that came out recently that bacon causes cancer. It’s real news, but everyone likes bacon so it was also news that people were seeking out and sharing. So what did we do? We offered a Bacon/cancer explainer. We called it, “Bacon Causes Cancer, But Don’t Freak Out About It.” It has music, a short video, and short captions. It was shared like crazy on Facebook.

AA: I love it. Also, I’m glad I don’t need to freak out. So what other story/content characteristics do you consider at Digg? Any other factors that Professor Berger could investigate?

ANNA: Maybe some kind of “intimacy.” What do I mean by that? Well, on the internet, you can be very successful with online video, and so everyone has a video strategy. But we find that it’s the authentic videos capturing real, unguarded moments that really go viral. People prefer these unstaged or informal videos over highly produced videos, perhaps because they are more “intimate” in some sense. You feel that you’re right there with them.

The Internet enables and encourages this kind of sharing where you don’t see the actors and more professionalized people you might see on television. And what’s interesting is now we see these savvy internet marketers who will try to reproduce or mimic this effect. The camera work is shaky. It feels unpolished. But it’s a fine line. People can see through this. They’ll say, “This feels artificial. This is just a stunt. These guys are just trying to become internet stars.”

JONAH: Yup, authenticity is key.  The more something looks like an ad, or like it was designed to be shared, the less likely people are to pass it on.

AA: I guess it’s tough to fool the internet. So Digg is based on the idea that people want to see what is most popular. Yet should we care about something simply because it is viral? Are viral stories worthwhile, interesting, or relevant by virtue of their viral-ness?

ANNA: Our tagline is: ”What the internet is talking about,” and this is purposely vague.

So remember the two-toned dress? It was white/gold, or blue/black depending on who you asked? It was an internet sensation. We can’t avoid that. Had that not gone viral would we have put that up? No probably not.

Yet the dress represents a piece of daily cultural literacy that people were talking about. And we can give you that, which maybe you’d like to know that day. But we’re not a duplicate of buzzfeed, which is more explicitly focused on social and shared content.

We will balance the stuff you should know for this kind of daily cultural literacy, but also allow to take part in cultural discovery. So we might show a smaller publisher who does a great post. So you’re first to a story that others might not have heard about. This allows you to be an influencer.

AA: Ok, so now we’re getting into how you’re differentiated. How does it work? My sense is that Digg leverages technology, including social media like Facebook and Twitter, as a means of getting real-time access to viral stories. Next it adds a layer of human mediation as a means of enhancing the user experience. What are the factors that inform how the human editors select Digg content? Are they focused on driving more sharing and social transmission?

ANNA: Right, so yes, we use algorithms that fit on top of social signals to check our biases. We don’t want to be blinded by our own judgments. We make our algo public at: This covers every domain that’s hit the domain of Digg, and items are scored by a combination of tweets and mentions.

Separately, we have a second feed that is a personalized list of people and institutions we follow on Twitter that we have identified as influencers. So sometimes this will overlap with the algo. Then we will look at and use the two lists.

So for instance, it’s difficult to cover every aspect of, say, the presidential elections. For Digg, in areas like this that aren’t necessarily in our wheelhouse, we can leverage these two sources to determine what we need to put on the site to get the best overall coverage for our users.

AA: Wow, so you hand-pick some influencers. Malcolm Gladwell, in his book “The Tipping Point,” argues social sharing is driven by a handful of influential people – connectors, mavens and salesmen. But Professor Berger says this is not really true. He says that it is, instead, characteristics of the content itself that drive sharing. So how much do the Digg influencers drive sharing?

ANNA: Let me give you an example. There’s a comedian named Joe Rogan. He is a big personality, and he’s got a popular Podcast. Now when Rogan shares something, we see big bumps in traffic. We feel it when he shares. Any time he’s shared anything, it’s done amazingly well. And that’s sort of regardless of what it is. He tweets out fun stuff that is not “click-baitey.” This would be Gladwell’s maven or salesman.

But to Berger’s point, take the official twitter account of the New York Times. They’re a big influencer, right? It’s the New York Times. Yet they can tweet something and sometimes it won’t drive sharing at all. So I might argue that persona matters.

AA: So sharing makes the world go around. What about too much sharing? Is there such a thing? How do you measure that?

ANNA: Oh yes, for sure. For instance, we definitely saw “pope fatigue” a few months ago, and we think people came to Digg to get away from the relentless news coverage.

Likewise, we tend to stay away from, say, Halloween content. The media tends to go the whole hog, with everyone jumping in. We find it’s hard to get a meaningful slice of this, so we might start earlier. We might put some halloween stuff earlier, and try to ride that early crest. But as far as measuring too much sharing? We don’t measure it. It’s more of a gut check than specific numbers related to it.

AA: Thanks, Anna. That was fascinating. And thank you Professor Berger, for your insights.

ANNA: My pleasure.

JONAH: Sure, any time.

Fascinating stuff!

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About the Author: David Foulke

David Foulke
David Foulke is an operations manager at Tradingfront, Inc., a provider of automated digital wealth management solutions. Previously, he was at Alpha Architect, where he focused on business development, firm operations, and blogging on quantitative investing and finance topics. Prior to Alpha Architect, he was involved in investing and strategy at Pardee Resources Company, a manager of natural resource and renewable assets. Prior to Pardee, he worked in investment banking and capital markets roles at several firms in the financial services industry, including Houlihan Lokey, GE Capital and Burnham Financial. He also founded two internet companies, E-lingo, and Stonelocator. Mr. Foulke received an M.B.A. from The Wharton School of the University of Pennsylvania, and an A.B. from Dartmouth College.

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