The specter of uncertainty

What do Facebook’s less than stellar IPO and Bankia’s downgrade by S&P have in common?  If you’re uncertain, you’re right.

Facebook’s IPO was marred by uncertainty.  In the days leading up to its public offering, the talk surrounding Facebook was quite optimistic.  Yet, somehow uncertainty crept in.  My guess is that it had something to do with this survey by the AP and CNBC.  Check out page 4.  Apparently, quite a sizable number of the respondents believed that Facebook was susceptible to threats from some unknown upstart waiting in the wings.  Then again, this story, also from CNBC, suggests that banks are to blame because they withheld information from investors about Facebook’s slowing growth in lucrative areas.

Bankia, one of the five Spanish banks whose credit rating was downgraded by S&P to “junk” status, is another example of the havoc uncertainty can foster.  Holding over $USD 40 billion in bad mortgage loans, the bank asked for $USD 24 billion from the Spanish government to remain above water.  This request comes amid increasing investor disfavor over Spanish sovereign debt.  (For an elegant argument about why there is so much crisis in the Eurozone, see this op-ed in the New York Times about the Mundell-Fleming trilemma.)

So, why all of the uncertainty?  Why in the age of the Internet, when information seems readily available at our finger tips, does uncertainty haunt us?

Of course, this is a rhetorical question.  Just because we have the Internet doesn’t mean that we have all the relevant information.  (Is “complete” information even really possible?) Besides, information and what it all means is always an interpretive practice.  Among the many reasons behind Facebook’s embarrassing IPO debut, Morgan Stanley analysts had information that other investors didn’t have access to.  And, investors certainly didn’t have that information readily available on the Internet.  Bankia’s troubles are indeed tied to “uncertainty over restructuring and recapitalization plans.”  But, I have little doubt that the uncertainty looming over Spain’s economy also added fuel to the fire.

But all this rumination over uncertainty leads me to a question more apropos to this blog– a “hmm….” moment.  To what extent does the phenomenon of easy answers on the Internet lull us into forgetting that there are still things we don’t know?  That is, if I can search about Facebook all night and day as an investor and find a cacophony of information prior to the IPO, to what extent do I even realize that I might be missing something important? Or, do I get overwhelmed by the information and believe that I have enough to make an informed decision?  Maybe another way to pose this question is to look at it through the lens of the Eurozone crisis:  If all of the information that I have access to frames things in a certain way (e.g., many economists have pointed out the trilemma, but popular media haven’t really reported much about it) am I lulled away from asking other questions?

These are all complicated questions.  Moreover, they’re certainly outside my research interests.  Not to mention, I wouldn’t even know where to begin to figure out manageable research questions in this area.  Nevertheless, it’s interesting food-for-thought.