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.