Investing in Facebook? You may be crazy
(MoneyWatch) COMMENTARY Thinking of buying Facebook stock? You may have a mental disorder. No, really.
If you are considering investing in the social networking firm's upcoming IPO, first make sure you are not suffering from "Stockholm Syndrome." That's the phrase coined by criminologist and psychiatrist Nils Bejerot to describe a paradoxical psychological phenomenon -- when hostages express empathy and have positive feelings toward their captors.
I first described Stockholm Syndrome in an interview with The Wall Street Journal for an article about people who suddenly come into wealth. In the interview, I joked that owners and employees of companies will often have a lot of company stock in their portfolio because they suffer from "Stock" holm Syndrome (get it?) and tend to hold onto the shares out of loyalty to their employer.
I fear that many of the 900-plus million Facebook users who want to become investors are suffering from a similar financial version of Stockholm Syndrome.
Psychologists have long known that positive and negative emotions can be transferred from the source of the emotion to an innocuous person. For example, if you repeatedly deliver bad news to your boss -- even if you're not the cause of the bad news -- your boss may start to associate "bad news" and negativity with you. How many times have you cried out, "Don't shoot the messenger!"? It's basic stimulus-response. I see you, you tell me bad news, and I get angry. Repeat this interaction a few times and suddenly it shifts to, "I see you and I get angry."
What does this have to do with Facebook's IPO? You can flip this and it still works. If you are consistently the source of good news -- again, even if you had nothing to do with it -- you will be associated with positive emotions. This is why salespeople suggest lunch or dinner meetings. They know that eating gets us in a relaxed and positive mood, which increases their odds of landing a new account.
Of course, Facebook isn't your captor (written with a smirk), but it does have a powerful emotional grip on your life. Think about it. When you use the social networking service, you are typically connecting with your family and friends. All sorts of positive emotions and good feeling are associated with Facebook with each good interaction. Don't you feel a little boost when you look at Facebook's iconic blue logo?
Unsurprisingly, Wall Street has been buzzing about the Facebook IPO for months. What is surprising is the level of fervor outside of Wall Street. Everyone is talking about the offering, and nearly everyone wants the stock. Famed mutual fund manager Peter Lynch advised individual investors to stick with what they know by buying the stock of companies whose products and services they use and like. With hundreds of millions of users and 2.7 billion comments and "likes" a day, there are a lot of people in a position to follow that advice. Throw in a lot of greed and perhaps a little fear, and Facebook's stock may be in for a wild ride.
Is Facebook a good investment? I don't know. But I do know that investing when you're mentally and emotionally compromised is probably not a good idea.
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