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Hey, this is Sharan Trivata. Welcome back to the Business School podcast. And in this episode, I'm going to tell you about why the algorithm is lying to you. Not totally, but the main purpose of these social media algorithms is to push content out to you. Now, they never check, fact check the validity or the source or the accurateness of this content. Now generally this doesn't matter because business advice or health advice or whatever is different for people. But when it starts to get into money advice, people start to just believe whatever's on the Internet like the gospel. And I'm going to break down for you why this is a bad idea. So, and I'm going to show you the telltale signs where you can spot that this is a bad idea and the one simple thing that you can do to make sure you are protected from all of this. And I break this all down step by step, starting right now.
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One thing is for certain, just because it's tried and true doesn't mean it's working right now. So the big question is this, where can you learn what is working right now? The strategies, the tactics, the psychology and the exact how to, how to grow your business, how to blow up your personal brand and supercharge your personal growth. That is the question and this podcast will give you the answer. My name is Sharan Srivatha and welcome to Business School.
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I hate to be the bearer of a cautionary tale and that is not everything that you see, watch, hear, do on social media is real, is correct, is accurate and most importantly, is good for you. And I'm going to tell you about why, especially money based advice. Finance advice goes viral when it's actually wrong on the Internet and it gets ignored in a lot of ways when it's right. But did you know this is crazy stat. Did you know that over 50% of Gen Z learns about money primarily from TikTok? Now you may not even have TikTok account. That's fine, I. I'm still trying to figure out that app. But I will tell you what may not surprise you and why this is a problem. So finra, if I was a banker on Wall Street, I got all my licenses to be able to do investment advisory. Investment banking. FINRA is the body that actually protects and governs financial professionals. And FINRA reviewed over a thousand social media finance posts in 2024. Here are the stats. I wrote these down to to actually share with you. 70% of failed basic compliance standards, 55% hid the fact that they were paid for advertising, 38% never disclosed any of the risks. So the data actually tells us that whoever is shouting loudest, the biggest, loudest advice about money is actually the worst advice about money. And what do the algorithms do? They want to keep pushing those videos out because they know that more people will watch those videos. So there's this weird kind of algorithmic incentives to figure out who is right and who's wrong. And we have just started to believe that if some content creator says something about something online, whether you know this person or not, whether they're hanging out with their T shirt in on the beach or not, it's now that is the sign of success. Like if someone is sitting in a pool and is actually telling you something about finance, you think that's right because they have kind of made it. But you have no idea that the pool may be AI or pool may be rented, or the pool may just be in the corner of their backtop. The craziest part is like, by the way, I'm not talking, I am not qualified to talk about anything. Please know that. But, and this is clearly not financial advice because I'm not talking about that. But this time I'm actually mildly qualified to comment on this topic because for a few reasons. Number one, as you may know, I've had a chance to build, help build two public $2 billion companies, one of which was publicly traded on the NASDAQ. I've invested in over 100 plus deals. I actually have an MBA in with honors in finance, which I know doesn't mean much, but I'm aware I was a, I was a banker at Goldman Sachs and Credit Suisse on Wall Street. I've advised some of the biggest influencers in the world, which I know is ironic because I'm bashing influencers right now. I've held all the licenses. I've held the Series 66, the Series 6, the Series 63 and the Series 3 securities licenses. So I've done these tests and I will tell you this. Finance influencers do not optimize, do not care about your wealth. They care about views. And the algorithm pays them to do it. The sponsors pay them to do it. And the more they get, the more they can sell. Meaning this is not a content problem. This is actually an incentive problem. You are being shown stuff that is not accurate and you need to know about it. And I want to show you why that happens and how you can actually protect yourself from this. So let me explain. There is something called the algorithm economics problem. And that's. Well, I just made it Up. I didn't know what else to call it. TikTok, Instagram, YouTube do not care about accuracy of anything. They're not checking for accuracy. The only thing that they care about is like piracy of, you know, the soundtracks. But the algorithms care about watch time. They care about engagement. They care about how many times you share stuff. They care about how long you stay on the platform. A 30 second clip promising, like, hey, here are the three stocks that will explode this month are is always and always going to beat at like a, you know, a six, seven minute explanation of diversification or something that is actually good for you. The math is, I don't know, raw. It's, I heard this word raw dog and I'm still trying to figure out how to use that. The math is brutally simple because the confidence of the creator sells and the nuance, the, the details don't sell as much. People just want to hear the headlines. So when a creator posts something like, oh, something, I don't know, leverage is the fastest way to walk that video goes viral. Most people don't even know what leverage is. But when they post that leverage can destroy your account in two days. Well, that video dies. Did you know the 65% or more of viral finance videos imply guaranteed results? Because nobody wants to hear this might only work if you hold and manage risk and do all of that boring stuff. Nobody wants hard things. They just want the easy way out. They just want to hear do this and get rich. They just want the easy button for everything. That's what they want. And so when a video gives them that, when a video gives them confirmation bias, when the video tells them that this, you do this and it'll make it easy. When a video says life is like a vending machine, you put a dollar in and you get $12 out or a hot pocket out, when they do that, everything starts to break. And the platform, what did the platform do? The platform trains all these creators to skip all the boring stuff, especially in important things related to money. And the boring parts are what actually keep the money in your pocket. So where is the break? There is a hidden business model that not many people know about. And the hidden business model is this. These finance influencers do not make money from investing. Please let me say that again. Finance influencers do not make money from investing. Most finance influencers know nothing about money. They may have a stock, a bond, a mutual fund or what have you. But finance investors do not make money from investing. Most of them. Did you know that between like the last three years One firm, only one firm alone played influencers a flat fee for every new account that was open using their referral link. So I just say, hey, go to, I don't know, X website or Robinhood or whatever. And they just paid influencers a flat fee just for doing that. Did you know more than 40,000 accounts were opened through approximately 2,000 influencers? That's crazy. Meaning all these finance influencers often, almost always earn massive commissions from you, opening videos from you clicking links from you buying courses from you joining communities, from you getting in their discord chat, from you getting in their DMs. They just want you to click to add to buy so that they can paid get paid something else. Their content may not even be accurate because who's going to police them? Who's going to, you know what they say, hey, I'm just a random handsome guy on YouTube. I say that, but which is true. I'm just a random handsome guy on YouTube. But the crazy part is that most people don't even say that. I'm at least accepting the truth that I'm a random handsome guy on YouTube, which is insane. And the reason is their income. Their. Whatever money they make has nothing to do whether you make money. Their income has everything to do whether you click, you watch, you share. And this creates this brutal mismatch of expectations. This, this crazy raw dogging of expectations. So if an influencer says, hey, hey, invest in these index funds and wait 30 years, you are clearly not going to click anything. You're, you're not going to open an account, you're not going to buy the course, you're not going to, you're, you're, you're not going to join their group, you're not going to give them your email address, and because of that, the creator earns nothing. But if they say, hey, buy the stock now before it explodes and you can use my free link to do that, you click it, you open it, you buy it, and the influencer gets paid today. And sadly, you and I have to figure out who this person is, figure out if they're legit and if the advice actually works six months from now. And most of them don't even stick around for that, or if they do, they're just getting paid more commissions. Now what I want to tell you is, I want to tell you to get. Since this is related to money, I thought it would be important for you to know what would good finance content actually looks like. When I see good finance content, I actually really like it. I'm like, man, this is awesome. Some dude did a good job or some gal did a good job of really sharing this with the audience. And less than 20% of finance content actually offers educational value. That's the research that I read. And for your benefit, here is what good finance content looks like. It's got three pieces to the puzzle piece. Number one is it explains compounding and time horizons. Not sexy stuff. Not get rich quick teams. Not, like, do this right now and get rich right now. That's super important. Number two, it discloses, like, a bunch of risks. Because you and I both know that finance financial stuff has to us. So when. When did you know that influences are promoted like margin lending and explain margin calls and, and. And crazy things that are, you know, hard for people to understand? And FINRA actually find firms with these money, like, it's, it's crazy. I'll give you the last part of it. You want good finance content that teaches principles because they can't pick hot stocks for you. If I, if I like a certain stock and I shouldn't advise it to you because you have, I don't know what else you own. I don't know what your goals are. I don't know how old you are. I don't know what you want to do with that money. And when I say how old you are, I'm not, like, trying to, you know, age bias here. I would invest, you know, my, my son, If I'm investing one share of Disney for my son, and he's 14, that's very different than doing something for somebody that is 45. Like, it doesn't move the needle as much. Right? That's what's important. So you want to look at finance content that actually teaches principles, and that's what's super important. And when that happens, good things happen after that. All right, so last three rules. I'll give you these rules, and then I will give you back your day three rules for consuming this finance content. Because I was like, all right, so I can't just bash finance influencers and then not give you something to actually work with. So rule number one, if it sounds guaranteed, it's probably not true. If somebody says something like, okay, this stock will double, or this, you know, this is free money, or you could do this and save all your dollars in taxes. Like, that just does not work. Right? That is a fake guru. But gurus are really good because they sound insanely convincing. I was talking to a guru recently, and I asked him, you know, why he promotes LLCs and I told him, I was like, have you even opened an llc? He's like, no, I have never opened an llc. I don't, I understand what it is because when I, when I talk about LLC is my content does really well. So he just reads up on ChatGPT and then he just makes a script and he tells it to you convincingly. This is crazy. So if it sounds guaranteed, it's probably not true. Number two, you want to ask this question, who benefits from this advice if the influencers finance posts fail to disclose that they were paid by advertisements and you know that they don't benefit you? So I would ask, hey, do you, does this person make money if I do what they say? That's just a good easy question to ask because the incentives are just mismatched. And last but not least, this is the most easy thing. Whenever I see something that I, I, that it looks interesting, I send it, I do some research on it. Most of the time I send it to my, my friend, right? I'm like, hey, if I get a piece of investment advice, I'll send it to my financial advisor. If I get, if I get a piece of like trusting state planning advice, I'll send it to my family office guy. If I get, you know, a piece of tax advice, I'll send it to my CPA and be like, hey, is this actually true? And so now I get a chance to revalidate that claim with people. By the way, I recently saw this, you know, mortgage strategy which I thought was super interesting. And they said, you know, you can get rid of your F rate mortgage and actually do everything with a HELOC and run your HELOC like a checking account and instead of having a 30 year mortgage, you can pay it off in three years. Well, I sent it to three people who were three people who are all top mortgage professionals. One of them had no idea what I was talking about, which is interesting. The other was like, hey, I've done something like this before, but the, these numbers are not accurate. The third was, hey, this person's like totally cuckoo. Which I thought was fascinating because someone is actually seeing that and wanting to do that advice. Which is crazy if you think about it, right? So I want to kind of leave you with this. I really believe that, you know, being online and social media is good for discovering new ideas because somebody has taken the, this idea and tried to wrap it in a, in a, in like a pigs in a blanket and wrap it in, you know, with, with turkey and bacon and feed it to you and it's good, unfortunately, I just, I'm just going to suggest it's bad for making decisions. So don't make any decisions with discovering these ideas. Don't open accounts or don't, you know, get stock tips from what you see online. Don't be swayed by the stock is going up and somebody else invested in the side. Don't be swayed by that. You're discovering new ideas. Just find a way to validate them. You know, are you going to spend time looking it up on, on, on, on a different site or on AI or are you sending, going to send it to a friend who's an expert and have a, have a group conversation about it? Just verify with boring sources. If you just did that, everything will get a lot easier. I just want to tell you that finance influencers are not the problem. They are literally like a mirror mirror on the wall that shows you what you want to hear. Because the more they do that, the more you view stuff and the more you view stuff, the more views they get. And the more views they get, the more viral they go. More viral they go, the more they get paid for commissions. And then it gets in a really bad loop and they don't know what to do, so they make more content that makes it. You want to click and view. And then now since we did that, we get bad content from that. Influencers are not financial advisors. They don't know anything about finance. Most of them, they don't. So please, please, please verify the with the boring sources because that will give you the best results overall. All right? I hope that was helpful to you. That was my cautionary tale. Whenever you see stuff online, just verify with boring sources. All right, if you like this, can you do me a favor? Can you screenshot this and tag me? That way I can make more like this for you. So do me a favor, screenshot this, tag me and I'll make more like this for you. Hey, this is Sharon.
- [14:29]
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I have an awesome free gift for you just for listening to the podcast. As you may know, I've got a chance to build $2 billion companies the hard way. So if you like this episode, you will love getting the exact playbooks from those wins. It's on my substack called My Next Billion. It has the exact frameworks I wish someone had given me when I was.
- [14:48]
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Figuring it all out.
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Now you get the real lessons from.
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The trenches as I go for a.
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Three peat and build the next billion. So everything's free at my next billion dot com. Please check it out. My next billion dot com.