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Social media algorithms are designed to show you things which make you upset because that type of content is highly likely to "engage."

aren’t they designed to optimize for most engagement, in whichever way they can (which turns out to be with upsetting content)?

Or are people actually selecting specifically upsetting stuff?

Yes, they are designed to select for most engagement, regardless of the content.

It's not just algorithms, MSM do this too. 'Fear sells'

If it bleeds, it leads. That was invented long before social media and ML social manipulation algorithms.