Social media has hooked young investors on finance, but a growing number are taking more and more risks. ‘Finfluencers’ and money experts say it’s time for some caution.

young people on phones
Young investors can make mistakes that can end up costing them

  • There has been an increase of financial education and advice content on social media apps, enticing young investors.
  • Recent research shows that young investors are following riskier, more short-term strategies to make profits.
  • ‘Finfluencers’ and money experts alike urge have urged young investors to be cautious.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The rise of ‘finfluencers’ and huge surge in financial content on platforms like TikTok, Instagram and Twitter over the past 18 months has hooked a new generation on finance and investing.

Young investors are spending their spare cash on cryptocurrencies and stocks – with a large number of them following the advice they got from scrolling through social media, lured in by promises to get rich quick and beat the system.

Videos tagged #finance, #investing or #stocktok on TikTok have billions of views – a total of 7.5 billion at time of writing. Clips hyping stocks that are “going to the moon”, promising consumers they can easily turn $10 into $10,000 or kickstart a “doge revolution” dominate the financial social media scene and drown out educational content.

“The FOMO culture that dominates social platforms like TikTok, Reddit and Instagram has become a breeding ground for the marketing of high-risk investments shunned by the mainstream investment industry – often for good reason.” Myron Jobson, personal finance campaigner at Interactive Investor, told Insider.

Recent surveys have shown young investors are pursuing riskier strategies than older generations. Last month, Barclays research showed 21% of Gen Z investors are investing to take advantage of current market conditions and 16% are trying to “play the markets”.

Interactive Investor published a survey earlier this month showing more than half of young investors who have purchased bitcoin or dogecoin have done so using debt from credit cards, student loans and other types of loans.

A Motley Fool study conducted earlier this year showed that amongst Gen Zers particularly, social media plays a key role in how they make their financial decisions.

Not all financial social media content can however be labeled the same. With the same hashtags that promote questionable investment and financial advice, there are videos with sound advice explaining Roth IRAs, how to increase your credit score or the benefits of long-term investing.

Tori Dunlap, a money expert who started her first business at age nine and accumulated $100,000 worth of savings by age 25, is one of the ‘finfluencers’ who shares such content as part of her brand Her First $100K on TikTok.

She said even before TikTok, bad financial advice was everywhere – it was just delivered through a different medium. Her main issue with the app is the 60-second time limit on videos. This feature was recently removed, but longer videos are still rare.

“I have a lot of parameters because I only have a minute and so I am using TikTok hopefully for folks as a jumping off point of like ‘I’m giving you this bit of education, now go read about it,'” she said in a recent interview with Insider.

Dunlap believes problems arise when consumers stop questioning the content they are taking in – after receiving good advice once, it’s easy to keep trusting what you see online, she said.

“You have to go ‘does this seem too good to be true?’ and if it seems too good to be true, it probably is. Or, just google the person.” she said.

Jobson agrees – he recognizes some content is helpful, but warns consumers to approach online investment advice with caution and to check the credibility of those who are giving it.

“There are some good materials out there to help people on their investment journey, but, more generally, we have seen concerning social media posts.” he said. “The advent of broader online ‘influencers’ has seen rise of so-called ‘financial influencers’ – many of whom haven’t got a clue on what they are talking about to put it bluntly.”

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Jeff Bezos believes multibillion-dollar failures are actually a good thing: ‘If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle’

Jeff Bezos
  • As Amazon’s CEO, Jeff Bezos said he made big bets that sometimes ended as, “multibillion-dollar failures.”
  • This view lines up with Bezos’ approach to life: Failure is better than never having tried at all.
  • Bezos will step down as Amazon’s CEO on Monday, July 5.
  • Visit the Business section of Insider for more stories.

What’s the point in making billions if you can’t make a multibillion-dollar mistake every now and again?

According to Amazon CEO Jeff Bezos, those types of failures are actually critical to Amazon’s success.

“Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures,” Bezos wrote in the company’s 2019 letter to shareholders.

“If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle,” he said.

Amazon Fire Phone
The Amazon Fire phone.

He cited Amazon’s infamous Fire phone as an example of a failure – but pointed out that work on the Fire phone assisted in the development of Amazon’s Echo smart speakers and the Alexa digital assistant.

“While the Fire phone was a failure, we were able to take our learnings (as well as the developers) and accelerate our efforts building Echo and Alexa,” Bezos said.

This philosophy – that it’s better to have failed than to never have tried in the first place – is core to how Bezos looks at his own life.

“I knew that when I was 80, I was not going to regret having tried this,” Bezos said in a 2001 interview with the Academy of Achievement. “I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed, I wouldn’t regret that. But I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day.”

amazon prime day amazon dash buttons 2x1_smaller
Amazon Dash buttons are no longer sold by Amazon.

In the case of Amazon, Bezos applies that same philosophy on a much larger scale.

“This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society,” he said. “We will work hard to make them good bets, but not all good bets will ultimately pay out.”

Of course, this being a letter from the CEO of a publicly-traded company to its shareholders, Bezos has reassurance and tempering to offer as well.

As Bezos put it: “The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.”

Bezos will step down as Amazon’s CEO on Monday, July 5. He’s being replaced by Amazon Web Services CEO Andy Jassy.

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The Ever Given crisis put mega ships under the spotlight. As vessels get bigger and more automated, a long-serving captain and other experts are weighing up the risks.

Ever Given Stuck in the Sand in the Suez Canal
The Ever Given cargo ship stuck in the Suez Canal.

  • After the Ever Given blocked the Suez Canal, industry insiders are taking note of other risks.
  • Bigger ships, more automation, and smaller crews are concerns, said Capt. Rahul Khanna, of Allianz.
  • Climate change has made a shipping route through inhospitable Arctic waters more popular.
  • See more stories on Insider’s business page.

Shipping vessels have grown larger by multiples in just a few years, adding to worries among some industry insiders that a single mistake made by a massive ship could cause a global supply chain disruption, as the world saw with the Ever Given.

That ship, which was stuck in the Suez Canal for about a week in March, slowed or stalled shipping traffic around the world. It was estimated to cost the global economy about $400 million per hour, and its effects have still been rippling through the economy in recent weeks.

As ships like the Ever Given have grown over the last few decades, their crews have been shrinking because they’re using more automated processes, said Captain Rahul Khanna, global head of marine risk consulting at Allianz Global Corporate & Specialty, whose team publishes an annual safety review.

“Decades ago, the ships with 3,000 TEU – that’s the number of twenty-foot containers that can fit onboard – were considered the big ones,” said Khanna.

Now, ships like the Ever Given carry maximum loads of more than 20,000 containers. Boat-building technology could in the years and decades ahead produce ever-larger ships, perhaps growing to 50,000 containers or more. If there’s demand for such ships, modern technology could allow for such builds, Khanna said.

Between 2006 and 2020, the largest shipping vessels in the world grew by 155%, according to a January report from the United Nations Conference on Trade and Development. The biggest ships are loading or unloading 125% more at each port they visit.

With bigger boats, there could be more impactful accidents.

“While seemingly efficient, they are too large to fit in some ports, increase dangers in storms, and highly piled containers are falling, causing product and the corresponding financial losses,” said Cheryl Druehl, associate professor of operations management at George Mason University.

Even the Ever Given debacle, which grabbed hold of the worldwide news cycle, could have been worse. If that ship’s hull had broken, say, it would have taken even longer to fix the issue, Khanna said. It’s likely that a crane would have had to have been constructed nearby to remove some or all of its load. Refloating it would have been a more complex task, likely stretching into months.

Surveying the world’s riskiest shipping routes

Container Ship in the Arctic
A cargo ship in the North Pacific Ocean.

As the shipping industry gets back to its normal routine, Khanna and other shipping industry insiders walked Insider through their concerns about the next big disaster.

The most obvious answer was that another ship could get stuck in the Suez or Panama canals. The risk of a situation similar to the Ever Given’s crash in one of those waterways was “unlikely but high impact,” said Ambrose Conroy, founder and CEO of Seraph, a consulting and turnaround firm.

The risk was lower at other heavily travelled shipping lanes, including the Singapore Strait, and the Strait of Hormuz, although it has geopolitical risks of its own, said Khanna.

Ports in the future may also have trouble handling larger ships, but that’s an issue that can be fixed with proper planning, Conroy said. Instead, it’s the “black swan events” like the Ever Given that the industry needs to look out for.

One concern is a shipping route that’s becoming more popular. In decades past, a lane through the Arctic would open in summer months, giving ships a more direct path between Europe and Russia.

As the climate crisis has reduced the amount of ice in those northern regions, that passageway is now increasingly being used in the winter. It’s become so popular that the International Maritime Organization issued a revised Polar Code.

As the Ever Given stalled global shipping in March, Moscow officials pointed to the Northern Sea Route through the Arctic as an alternative.

But Arctic travel comes with its own risks. While it’s unlikely that modern ships, with all their technology, would hit an iceberg, smaller ice floats can still damage hulls, Khanna said. An oil spill in the Arctic would also be devastating to marine life. And rescue crews might have difficulty reaching a stranded ship in such inhospitable waters.

Concerns about long journeys during the pandemic

A Ship in the North Pacific Ocean.
Crew aboard a Finnish icebreaker.

Shipping industry observers also say the health and wellbeing of ship crews are a growing concern for 2021 and beyond. Shipping can take crews around the world – “It’s easier to list the places I haven’t been,” said Khanna – but many haven’t been able to visit their homes since the pandemic began.

“Crews haven’t been able to go back home on their leave,” he said.

Automation hasn’t helped, said Druehl, the George Mason professor. With more automation, ships have been able to stay away from their home ports longer. And it’s brought up issues like “skeleton crews, leading to more isolation and risk of piracy.”

Decentralizing the manufacturing industry is one possible way to cut risk, said a few industry insiders. Bring manufacturing back in the parts of the world that have become importers, and shipping won’t be as much of a concern, they said. But that’s easier said than done.

“The intricacies of global logistics are meaningless to most, that is until the truck doesn’t show up and the shelves go empty,” said Richard Weissman, director of the Organizational Management Program at Endicott College.

Issues caused by the Ever Given were still trickling through the supply chain in the last few weeks, he said. But most people won’t notice, unless they’re among the few who actively follow supply chains.

He added: “Once freight crosses the threshold of the loading dock and the truck door closes, we tend to forget about it. That’s the one thing that has to change now.”

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