Ahead of the opening of the Euro 2020 football championship of Portugal, Cristiano Ronaldo was preparing for a pre-match press conference. Two minutes before the start, the megastar Juventus striker put aside the two Coca-Cola bottles placed in front of him and said “agua” (water), smiling to reporters.
The reaction to the playful move, which included a plethora of news articles saying Ronaldo’s stock was responsible for erasing $ 4 billion from Coca-Cola’s market value, illustrated a serious problem.
A post-truth world
In 2016, the Oxford English Dictionary’s Word of the Year was “post-truth”. Post-truth is defined as “relating to or designating circumstances in which objective facts have less influence on the formation of public opinion than appeals to emotion and personal belief”. The phrase gained prominence during the Trump presidency and the UK Brexit referendum. But there is a deluge of unsubstantiated claims made every day by people whose importance helps shape politics and public opinion. In the past year of the pandemic, for example, we have all listened to people with no medical qualifications explain the health crisis. Unfortunately, their comments often influenced decision making.
In today’s (social) media landscape, the truth can be deliberately manipulated and disinformation is a growing activity. It is important to note that we news readers are naturally programmed to accept the “evidence” that supports our pre-existing views (ie, confirmation bias) and ignore opposing arguments.
This phenomenon affects individuals and businesses. And it has the potential to undermine democracy.
Given his status as a global superstar and his vast reach on social media, Cristiano Ronaldo’s actions in moving the Coca-Cola bottles are likely to have implications.
However, within hours of the opening of Euro 2020, a series of articles appeared around the world suggesting that Ronaldo’s disgust with unhealthy Coca-Cola products had wiped out $ 4 billion in the brand’s value. .
A multitude of trade publications have echoed this thought. Many have quoted the Spanish newspaper Marca, who had “analyzed the [Coca-Cola] data from the New York Stock Exchange. Other media simply repeated the message without quotes: Some commentators concluded that a man, from a relatively small country, could sink an American multinational. Others praised the taste-creating power of influencers and argued that more companies should elevate them in their marketing plans.
Yet much of this conjecture has been built on a shaky, if not false, premise.
The incident reveals the importance of critical thinking for business leaders and the reading public, especially now.
What else is driving stock prices?
It is true that Ronaldo, in front of the press, refused to drink the strategically placed Coca-Colas offered. It is also true that at the end of the press conference, the value of Coca-Cola had fallen by $ 4 billion. However, other factors affected the beverage giant’s share price.
Some non-alternative facts:
- Coca-Cola owns 4.3 billion shares and closed on Friday, June 11, with a price of $ 56.16 for a market value of $ 242 billion.
- On Monday, June 14, Coca-Cola opened lower at 9:30 a.m. EST.
- As of 9:40 a.m. EST, its stock price was $ 55.26 (down 1.6%) and the market value had fallen to $ 238 billion, down $ 4 billion from the previous day.
- Cristiano Ronaldo moves the Coca-Cola bottles at 9:43 am EST and says “Água”.
So it’s a fact that Coca-Cola’s market value was already down $ 4 billion at the time of Ronaldo’s snub. Instead, various factors unrelated to CR7 account for the drop.
For example, at 9:40 a.m. EST, the entire US stock market was trading low. Ford Motor Company has lost over $ 2 billion in market value.
Goods movements are often too complex to be attributed to a single factor. On the contrary, they are vulnerable to “confusing events” which occur simultaneously and whose relationship between them is unclear.
Another fact: on June 14, Coca-Cola shares became ex-dividend. This technical term is easy to understand. When you own shares of the company, you receive dividends on certain days. In the case of Coca-Cola, this date was announced more than a year in advance. Once Coca-Cola became ex-dividend, that dividend had already been distributed. Of course, the day the shares cease to bear dividend rights, the share prices automatically adjust to a lower number. In this case, the ex-dividend date coincided with Ronaldo’s conference call.
One last fact. From the time CR7 moved the bottles (9:43 a.m. EST), until the end of the Wall Street trading day, the Coca-Cola share price rose $ 0.30, adding 1.3 billion dollars in valuation to the company.
Why should we care?
Why should we care about the post-truth issue? Because the subject obviously extends far beyond sports and the stock markets and can have serious and widespread consequences beyond a battered stock portfolio. Fake news and handpicked information can come from simple mistakes made by inexperienced people. They can also be sophisticated and deliberate in their attempts to mislead. Lies spread quickly, especially on social media, and can potentially deceive voters and business leaders, as well as be used to justify government policies. There is a clear danger to individuals, businesses, societies and even democracies
What can we do?
The first step is to recognize that we have these biases. Next, we need to understand how these biases affect the way we view the news. Finally, there are methodological measures that can be taken to ensure that we do not fall into these traps. To begin with, understand that we live in a post-truth world. Don’t take a fact as a given. Sometimes even large-scale data is not enough, as there are issues with the quality of the data.
Storytelling is an important tool. And a living story tends to make an argument more alive. Nevertheless, we must be aware of the dangers of accepting a single story as hard evidence.
By Nuno Fernandes, Full Professor at IESE Business School and author of “The Value Killers. How Mergers and Acquisitions Cost Businesses Billions and How to Avoid Them “and” “Finance for Executives: A Practical Guide for Managers“