Countersignaling In Silicon Valley

A Facebook executive, who preferred to remain anonymous, made the following statement about the culture at the company.  “If someone buys a fancy car and posts a picture of it, they get ridiculed and berated.” Considering the fact that the two counties that make up Silicon Valley have some of the highest concentrations of wealth in the United States this sounds odd at first glance. However, the culturally literate Silicon Valley resident is well aware that having wealth is cool, gauchely displaying it is not.  The problem is that there is such a high concentration of wealth in Silicon Valley that being flashy serves as a useless signal.

So what happens in places like the Bay Area where there are numerous relatively wealthy males jockeying for high status?  They show off by not showing off, which is also known as countersignaling.  In signaling games we know that high-quality individuals will send signals to distinguish themselves from low-quality individuals.  Signaling games, however, become even more interesting when they are broken down into smaller and smaller social niches.  If you drive a flashy car, but so do all your peers, then driving a flashy car is not a very valuable signal in that social circle.

The term countersignaling is never mentioned in this NYT article, but it describes Silicon Valley culture and the idea of countersignaling perfectly.  “Fabulous home theaters are tucked into the basements of plain suburban houses. Bespoke jeans that start at $1,200 can be detected only by a tiny red logo on the button. The hand-painted Italian bicycles that flash across Silicon Valley on Saturday mornings have become the new Ferrari — and only the cognoscenti could imagine that they cost more than $20,000.”

The empirical work in a paper called “Too Cool For School? A Theory of Counter-Signaling” confirms the notion that subjects can learn to countersignal in order to distinguish themselves from others who are relatively similar.  When Mark Zuckerberg wears a hoodie that looks like it’s from Target to important meetings, he is demonstrating that he has clearly learned how to countersignal.

Another interesting thing to note about Silicon Valley culture is that not going college can be a sign of especially high status.  MBA’s, even from Ivy League schools, are a dime a dozen in the Bay Area and confer very little status in many social circles.  Based on the theory of countersignaling, then, one who is wildly successful, but didn’t finish college (e.g., Zuckerberg and Gates) is displaying an effective countersignal.  The fact that they bailed on college, and were still successful, signals how intelligent they really are.  Bryan Caplan asks an interesting question though: “How successful does someone have to be before he starts bragging, “I never finished college” or “I never went to college?”  In other words, how successful do you have to be before countersignaling improves your status instead of making you look like a chump?  Countersignaling can easily backfire if it’s used in the wrong circles.

The irony is not lost on me that writing a blog post about countersignaling in a public forum is itself a form of signaling, perhaps even countersignaling.  It’s almost as if I’m screaming, “Hey, LOOK AT ME, I’m so smart and clever that I can point out when others are countersignaling.”  I may be guilty as charged, but I really am those things (that’s a joke — or is it another signal?).  Human interaction is all about signaling and there is no way any of us can avoid signaling — it’s merely a matter of what you want to signal (trust me, signaling to others that you read this blog is a good thing).  Even refusing to signal is itself a signal.

Human culture is created by how we concoct and manage our images.  Accordingly, an old Sprite tagline from the early 90’s was wrong — image is actually everything.