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It's no coincidence that the rise of social media has coincided with the abrupt end of America's thirty year consumer binge.

“In order to stand well in the eyes of the community, it is necessary to come up to a certain…conventional standard of wealth.”

So wrote Thorstein Veblen in his century-old, but seminal economic work, "The Theory of the Leisure Class".

The book is based on a very simple premise.

Veblen called it "pecuniary emulation". In other words, people buy stuff to look good and keep up with the Joneses.

Vanity, and ego are at the very heart of human nature, and purchasing handbags, fancy cars, jewelry, and Rolex watches to name but a few baubles that we used to need with a vengeance is the most prominent expression of that primal drive to preen and project power. That's the definition of 'conspicuous consumption' - a term that Veblen coined.

Fueled by the easy credit of the nineties and last decade, economic growth in this country was stellar. Vanity became normalcy. Everyone was prancing around festooned with the latest luxury brands. High end malls proliferated. Celebrities became aspirational clothes horses. That it was all just a chimera was something that we now know to be all too true, but at the time, any dark clouds were disregarded as "froth" and "exuberance". Then came the bursting of the sub-prime bubble in Spring of 2007, the failure of Bear-Stearns in March of '08, and the collapse of Lehman Brothers, and the markets that September.

After the dust had settled, the recovery boosters kept up the heat to talk up a comeback, but the economic recovery hasn't materialized, and is unlikely too without some very serious triage, which nobody seems to have the political will to implement.

Consumer spending just collapsed in '08, and it really hasn't recovered to any meaningful degree. Unemployment is nudging 10% and is likely far higher, but for a few convenient Labor statistic fixes, and the end is not in sight.

And yet people are still people. They're still vain. They still want to show off and say "Hey Look at Me". In the past, money was the gateway to satisfying vanity. But when the money isn't there to help them, they have to find a cheaper way.

Cue Facebook and Twitter. All you need is the internet and a keyboard, and you can tell the world how fabulous, interesting, connected and influential you are.

Doesn't cost a penny.

Twitter jumped the shark at the end of '07 and during '08, Facebook broke out of its college kid shell in September 06, and began to grow exponentially in '08.

At almost exactly the same time, the Great Recession, as it's politely called, began to seriously impact employment and consumer spending in the latter part of 2008.

Facebook and Twitter began to ride that wave.

Facebook in particular is a fabulous recession business. All that vanity drives page views, the sheer volume of which is so great (its Page rank is 10 out of 10), that the company is able to attract big player advertisers who want to tap into its vast user base. Facebook is a huge player in a still tender ad market.

Indeed, part of the current privacy issues that Facebook is facing (including the very recent spat on social graph transfer via third party applications) is due to a widespread ambivalence about vanity and it's opposite number - privacy. The urge to display through public interaction and the need to maintain privacy are both inherent and contradictory to each of us.

Naturally, Facebook encourages the former impulse - vanity - which they call "sharing" rather than the latter which they protect via conveniently byzantine 'privacy settings'. The reason is simple. Facebook's not going to make much cash protecting privacy and closing networks. The more openness the better their bottom line.

It's almost impossible right now to prove that the rise of social networking and the arrival of the recession are not historical coincidences, although empirically, there does seem to be a strong basis for a relationship.

But if the economy improves and vanity does once again return to the marketplace at the same time as there's a stabilization or drop in traffic to Facebook and Twitter, we may be able to thank Thorstein Veblen for the insight.

Simon Gornick

Published 26 October, 2010 by Simon Gornick

Simon Gornick is the founder of Moovd, an instant video content creation tool, and a contributor to Econsultancy.

3 more posts from this author

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Gabriele Maidecchi

Well, you got me here.

I really didn't think about the connection, but it makes perfect sense.

In this regard, social networks are seen as a sort of escape from reality, and the new vanity coin is the amount of friends one has in each of them.

Now I have another reason to be looking forward to a new economic boom.

over 5 years ago

Simon Gornick

Simon Gornick, Owner at Moovd LLC

Hey, Gabriele, Sometimes history has a habit of creeping up on us all. It will be interesting to see how things pan out, but as an empirical theory, it may yet have credence.

over 5 years ago

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bcotier

Conjecture is the basis for many a conspiracy theory too. I don't disagree that there are folks whose egos and vanity are massaged by social media...Just hum... Stating that social media is predicated on vanity and ego as the prime motivators is seeing only one facet of a multifaceted phenomena. 

Social media proliferation tied to economic downturn hum... How about it coincided with the market penetration of computers in our lives. Computers are every where in our homes and in our hands with mobile devices and therefore it is easy to entertain ourselves with them. Looking at the high entertainment value along with the  digital gaming industry and the make-up industries booming during the current recession would all be validated by similar occurrences in previous economic downturns.

Don't have money to spend on going out to dinner or taking a trip or buying an expensive outfit. Play a game, chat on Facebook, buy a tube of lipstick. It takes your mind off not having a job or losing your house or cutting your budget back AGAIN.

That theory is validated by behavior patterns from previous difficult times. 

Still it is an interesting concept.

over 5 years ago

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Tom Cheesewright

"Twitter jumped the shark at the end of '07"

Really? I'm not sure that you have the correct meaning of this neologism - certainly doesn't fir the context of your otherwise thought-provoking article.

over 5 years ago

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James Hart

Utterly ridiculous

I think the writer has completely lost his marbles.  How can you possibly suggest that there might be a correlation between the rise of social media and the recession.

you say"...empirically, there does seem to be a strong basis for a relationship."

What data are you referring to?  It strikes me that you are looking at some dates that might suggest closeness, but what other factual insight can you possibly be alluding to.

The recession officially started Dec 2007, yet US unemployment rates only really started to climb Climb 2009 (US labor stats (http://www.bls.gov/opub/ils/pdf/opbils87.pdf)).   Consumer confidence started to return shortly after 2009.  And yet the social media rise continues unabated.  

If you are looking to persuade us that there is a correlation.  I think you need to cough up more valuable analysis.  Shame.

All I can say is "…lies Damn lies and Statistics".

over 5 years ago

Peer Lawther

Peer Lawther, Digital Content Manager at StepChange Debt CharitySmall Business

It's an interesting concept but social media (and the social media ethos as it is presently) rose concurrent to the recession. I doubt one informed the other; it all seems a bit of post-hoc fallacy to me.

Let's not forget that the "web 2.0" social media raison d'être was formed during the boom. Mass market thought is still informed by that boom and as such, behaviour takes a while to change. When the cuts bite, that's when behaviour will change. We're not there yet.

There's the famous reasoning that the best ideas come out during a recession so I'd expect there'll be more correlation between the state of the nation and the state of social media in a few years time rather than now (perhaps that's what will inform "web 3.0" behaviour?).

Yes, there's vanity at play (Facebook uses physical vanity to its advantage, Twitter uses mental/knowledge vanity) but that would happen irrespective of boom/boost.

Either way, it's a fascinating area.

(Post script: I'd say that privacy issues is more informed by our innate ideas of fairness alongside getting to grips with the new ethos/technology; sharing is simply because we want to communicate. It's just the tools have changed and we're still in a period of flux)

over 5 years ago

Arron Zhang

Arron Zhang, Business Consultant at Advangent

Ineteresting analysis but I don't agree with the conclution unless there's some more evidence to back it.

My opinion is that social media is an extension rather than an subsitution for vanity. Our vanity has spilled over to the internet and there's a big chance for us to spend big monney on it. Nother comes free although it might feels so at the start. Most of the time we just get addicted to something and when the right time comes we'll have to pay, we're not ready yet but sooner or later we'll be so happy to pay for what social network can provide for us.

over 5 years ago

Simon Gornick

Simon Gornick, Owner at Moovd LLC

@bcotier good points. I'm not saying there aren't other techonological factors in play, but I do believe that human vanity can express itself in many ways, and when there's less money to nurture it with, people find other means. @tom i always thought jumped the shark referred to going mainstream. If I'm wrong I apologize, but Twitter is clearly mainstream now. @james. Firstly, thank you for implying I once had marbles to begin with. Secondly, u/e is a lagging indicator, and while US unemployment only started skyrocketing in 2009, there was tremendous fear and apprehension in the employment marketplace from mid 2008. Consumer sentiment was in a trough well before unemployment began to rise, and to suggest that it's returning to any meaningful degres in the United States at least, is not borne out by either same store sales figures or GDP growth. Thirdly, I'm not looking to "persuade" you of a correlation, merely to suggest one. I'm not a lawyer. I'm a guy who writes stuff that people might discuss. Finally, I'm not sure that shame really enters into the equation. I reserve that for far more heinous crimes than writing slightly provocative blog posts. @Peer I'm referring more to the US than the UK, but the principles are similar. I'd agree that we'll have a better understanding of the relationship in a few years time, as I mentioned at the conclusion of the piece. @Arron Could you clarify what you mean by "When the right time comes, we'll have to pay"? Are you suggesting that FB and Twitter will charge for their service, or that we "pay" via advertising which is the standard model. If Facebook cost $1 a month it wouldn't be 10% as large as it is now. Free is key.

over 5 years ago

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arronzhang

That's a very thorough response to all the comments, I do appreciate. To clarify my point I didn't mean to pay for having a FB or Twitter account but we've already started to pay for various kinds of service rendered by them, for example, Walmart (if I remember correctly) has begun to sell FB cards so you can get the credits to use some of their apps. I mean it will grow in the future. You're rigth about Free is key (as it is nicely put in the movie The Social Media), but nothing is really free.

over 5 years ago

Simon Gornick

Simon Gornick, Owner at Moovd LLC

@arronzhang too true. nothing is really free. it just appears free. It's target that's selling the credits, but I just don't see why anybody would buy them when they're having trouble budgeting their real lives rather let alone their virtual ones.

over 5 years ago

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