Over the last 50 years, there has been an increasing acceptance of the Efficient Market Hypothesis by investors. The hypothesis states that efficiency in financial markets results in prices always reflecting the actual value of assets. Therefore, it is not possible for investors to purchase undervalued assets or to sell assets at overvalued prices. It is not possible for an investor to outperform (beat) the market through security selection. This has resulted in increasing numbers of investors adopting a Passive Investing Strategy.
Advances in technology; in the gathering, processing, and analyzation of data, in communications, and in artificial intelligence, have been the leading factors resulting in increasing efficiency in financial markets. Can it be that these same factors have driven increasing efficiency in election results?
In a recent interview in POLITICO Magazine, Democratic polling expert David Shor stated that “Politics is fundamentally about splitting the country in half.” In a two-party system, the more efficient each party is at attracting voters, the more likely it is that each party will attain very close to fifty percent of the vote.
As the twenty-first century has dawned, we have been experiencing increasingly close elections. Beginning with the Presidential election in 2000, all but one of the elections has been decided by less than 4% of the popular vote. The lone exception was the election in 2008 which was decided by 7.2% of the popular vote.
Contrast this with the Presidential elections from 1952 through 1996. Eight out of twelve of these elections were decided by 7.7% or more. Five were decided by double digits. It does need to be noted, however, that three of the elections between 1952 and 1996 were among the top five closest since 1952; the elections in 1960, 1968, and 1974 were all decided by less than 1% of the vote. Despite this fact, the margin of victory in the popular vote is becoming ever closer, particularly since 1980. Technology has played a crucial role in this trend.
Technological advances in the gathering, processing, and analyzation of data have been critical. Social network firms like Facebook, Twitter, Instagram, YouTube, and LinkedIn harvest and sell the data of their users. Online retailers like Amazon, eBay, Walmart. and Apple do the same. This is in addition to firms that specialize in the collection and processing of data. These advances in technology have better enabled political parties to identify who and where the party’s likely supporters are.
Advances in communication technology have been crucial in several ways. Social network firms like Facebook, Twitter, and Instagram make it possible for political parties to directly contact the voters they are precisely interested in reaching. The proliferation of the number of television stations available as a result of cable TV technology means that on a macro level wide swaths of voters can be reached who have the particular demographic structure that each party is aiming for. Talk radio programs target specific audiences and deliver the specific messages the audience wants to hear.
The use of artificial intelligence enables political parties to precisely identify the issue(s) that are of the greatest importance to any particular voter. The party can then emphasize this issue(s) in any communications that is sent to the voter. The message can be precisely tailored to arouse the greatest possible reaction by the voter to maximize the voter’s commitment to the party and animosity to the opposition.
As both parties use advanced technology in data, communications, and artificial intelligence to engage voters, each party becomes increasingly efficient at maximizing the number of voters committed to them relative to the other party. The result is an electorate evermore precisely divided at 50% for each party. Elections become increasingly close.
The new norm for our country, and democracies in general, may well be elections that are painstakingly close. This maximizes the value of each vote, makes it imperative to have voters who are committed to the positions the party advocates, makes voter turnout crucial, and puts an ever greater need to ensure the integrity of our elections.
Increasingly close elections means our nation must commit the resources to ensure our elections are fair, transparent, and that voters across the nation have an equal capability to cast their votes and have them counted. Voters must believe that our elections are free and fair if they are to accept the results of such close elections. Technological advances mean that each vote now matters more than ever. We must be prepared to meet this challenge.
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