well as contagion through person-to-person contact.15 The existing model can
accommodate that change with higher contagion rates for narratives owing to
social media automatically directing narratives to people with likely interest in
them, regardless of their geography.
Sociologists Elihu Katz and Paul F. Lazarsfeld in 1955 showed impressive
evidence for a “two-step flow hypothesis” that cultural change begins with the
news media but is completed via the “relay function” of word of mouth within
primary groups, led by the relatively few group members who pay attention to
the news.16 The marketing profession has responded by promoting word-of-
mouth seeding strategies and television ads that feature actors portraying people
with whom the common person can identify and simulating direct interpersonal
word of mouth. Moreover, marketing literature finds that direct word-of-mouth
communications still beat other forms of communication in terms of
persuasiveness.17 In considering whether the Internet and social media affect the
SIR model, Laijun Zhao and coauthors (2013) argue for a modified SIR model
where the news media increase analogues to the parameters c and r.
Christian Bauckhage gives evidence that the SIRS variant of the Kermack-
McKendrick compartmental model fits time-series data reasonably well on
Internet memes from Google Insights (now Google Trends.)18 He looked at silly
recent Internet viruses like the “O RLY?” (Oh, really?) meme that displayed
nothing more than a picture of a cute owl with what would appear to be a
puzzled facial expression. Because the memes are largely nonsensical, we might
expect them to follow a course independent of other ideas and thus to fit the
SIRS model well, as Bauckhage found. He found roughly the same hump-shaped
pattern of infectives among Internet memes again and again.

Further Reasons to Think That Economic Narratives Have
Epidemics as Diseases Do
Even though modern communications media have made direct face-to-face
communication of ideas less important, the Kermack-McKendrick three-
equation model still remains a workable model for idea epidemics. The core
model may apply no matter how people connect with one another.
My colleague John Pound and I conducted a survey in 1985 of both
institutional and individual investors to try to learn how systematic they are in
their investing decisions. We asked all respondents to recall the latest stock
market investment they had made. We asked them if they agreed with the
following statement about this investment:
My initial interest was the result of my, or someone else’s, systematic search
over a large number of stocks [using a computerized or otherwise similar
search procedure] for a stock with certain characteristics.19
Among institutional investors, 67% agreed with this statement, but only 23% of
individual investors did. In a separate survey of investors in rapid-price-increase
stocks with high price-earnings ratios, we asked the same question. Here, only
25% of institutional investors agreed, and among individuals only 16% agreed.
How, then, do people start to pay attention to an individual stock? The
answer: word of mouth. We asked our respondents in the first survey how many
people they talked to about the stock. For institutional investors in the random
sample, the average answer was seven. For active individual investors, the
average answer was even higher: twenty. The conclusion is that people are not
generally systematic: they allow their attention to be swayed by unsystematic
responses to hearsay. This lesson from the realm of investing likely extends to
other economic decisions beyond investing, because it reflects basic patterns of
human decision making. Other suggestions that variants of the SIR model might
apply to understanding investments in individual assets include evidence that
people tend to invest in companies that are nearby geographically, and that
epidemics of interest in individual stocks sometimes proceed very swiftly but do
not ever infect a high fraction of the population (which the SIR model can
accommodate if both c and r are similarly high or confined to a small
geographical area).

Such models could help explain the geographical pattern of the spread of
economic narratives, including the Bitcoin narrative, which, though contagious
in many countries, does have a geographical distribution. Geoffrey Garrett, dean
of the Wharton School at the University of Pennsylvania, remarked on attitudes
toward Bitcoin upon his return from a visit to Silicon Valley:
Whereas most people on Wall Street remain skeptical, playing a wait-and-see
game, Silicon Valley is all in. Literally every meeting I participated in, from
the biggest tech companies to the smallest startups, was rich with enthusiastic
and creative crypto conversations.20