For years, the so-called “Oprah effect” was very real.
Books selected for “Oprah’s Book Club” made a huge impact on the bestseller lists. Most immediately became bestsellers, and at least 20 titles hit No. 1 on the USA Today list. (Toni Morrison’s books got a bigger sales bump from Oprah than from winning the Nobel Prize.)
For experts, a regular segment on Oprah’s show lit the fuse for a career to skyrocket. Dr. Oz. Dr. Phil. Deepak Chopra. Suze Orman. Rachel Ray. Oprah’s “best friend,” Gayle King.
Even seemingly niche products received a boost. In 2002, Oprah raved about aromatherapy slippers made by DreamTime, and sales immediately jumped from 3,000 pairs per month to more than 20,000.
So, yeah: The Oprah Effect was real.
And so, apparently, is the Musk Effect.
On Tuesday, Musk tweeted, “I kinda love Etsy.”
Sales of Marvin the Martian helms are unlikely to spike.
But Etsy stock did, jumping as much as 8.6 percent, setting an intraday record, and for a time at least adding $1 billion to Etsy’s market cap. (By the end of the day, Etsy stock was down 2 percent.)
Possibly not. Etsy shares are up approximately 600 percent since March. Also on Tuesday, equity research firm Jefferies increased its price target on Etsy from $205 to $245. Jefferies rates the stock as a “buy,” and wrote there is a “long runway to add buyers.”
Even so, most stocks don’t jump 8 percent over one analyst’s ratings.
Similarly, the share price of Signal Advance stock surged after Musk tweeted “use Signal.” As buyers mistook the medical device provider for the nonprofit makers of the messaging app Musk actually referred to, the stock rose more than 5,000 (yep, 5,000) percent and Signal Advance’s market cap increased from $55 million to more than $3 billion.
Prompting the nonprofit to tweet this:
So, yeah: Musk’s tweet put a bigger spotlight on Etsy. And, inadvertently, a huge spotlight on Signal Advance.
But should you react to that kind of spotlight?
“Quality” of Source Versus Quality of Information
Most of us focus a lot more on the “quality” of the person providing information than we do on the quality of the information itself.
If Warren Buffett gives you a stock tip, you listen. If the same advice comes from the teen who bags your groceries, you don’t.
Even so, we naturally add extra weight to advice we hear from the people we admire and respect, and we all naturally subtract a little weight from — or even disregard — advice we hear from people we don’t admire, don’t respect, or don’t know.
That’s totally understandable.
And yet that can also be a big problem.
Why? Say you run into Musk. You tell him about your company. He gives you advice.
Within seconds, you’ve decided to pivot. Or take on investors, even though you were dead set against giving up equity. Or hiring a CEO to take your company to the next level.
Maybe Musk is right. Maybe you should pivot, or should take on investors, or should give up the operational reins.
But maybe Musk isn’t right. He doesn’t really know your business or your customers. And he really doesn’t know you. He’s Elon Musk, for gosh sakes — but his opinions are based on his background, his experiences, and his perspectives.
What’s right for him may be far from right for you. Musk liked a purchase he made on Etsy, and said so. But that doesn’t mean the company will continue to grow. (Nor does it mean it won’t.)
Granted, in some ways — apparently, at the very least, in terms of stock picking — Musk may be the new Oprah.
But that should only serve to highlight a larger point.
Never embrace a message simply because you admire the messenger, and never reject a message simply because you discount the messenger.
Ultimately, what you think — as long as it’s based on data, and analysis, and considerable thought — always matters more.
