The story of the Great Depression is familiar even to those who did not live during decade after October 24, 1929. Articles, books, and films have depicted the crash of the stock market and the subsequent economic downturn that affected the world. Word of the crash spread rapidly. The tickertape machines could not keep up with the burgeoning sell-off, and by 11:30 a.m. many people had lost much of their wealth. People took the crash personally, as 11 suicides in New York alone on that day attest.
The market is a model of groupthink. Something initiates a downturn (or upturn), and suddenly people are jumping to join in the trading. Individuals can lose their identities and wealth as they conform to the movement du jour. “This is not a fair assessment!” you exclaim. “All those people had a very personal and individual stake in the trend of the market on that bleak October day. Each was acting individually to save his investment; each tried to avoid loss.”
You are correct, of course, but that is only part of the story. The loss of individuality came as not in the form of just one or a few people, but rather as a large group that thought the same way. By 11:30 a.m. their thinking had undercut the market so much that not even J. P. Morgan and other bankers—who subsequently had injected money into the system to stop the damage—could prevent the larger crash. Think about that. By 11:30 a.m. a large segment of investors acted in unison and panic.
Groupthink works very fast on a vast number of people. And today, with our more sophisticated interconnectedness, it spreads both emotions and ideas more rapidly and more extensively than anyone reading tickertape back in 1929 could imagine. Groupthink here is groupthink there in minutes. Place is irrelevant when one joins the group.
Of course, there are those who recognize a particular instance of groupthink as it occurs, and they enjoy some freedom from mob decisions. But to some extent all of us are like those in a rapid sell-off before 11:30 a.m., people who think and act because others, nameless others, are thinking and acting. Do we individually act with the group as a matter of self-preservation? Is it a matter of passive conformity? Is it just a matter of taking generalizations and applying them specifically? And how do we know when our thinking isn’t groupthinking?
Forget stock market economics for a sec. Acting to save your money is prudent, so when a financial crisis occurs, regardless of the number of people involved you have to take self-serving steps even when such steps are imitative. But consider any aspect of your life, such as whom you follow, whom you disdain, and whom you praise. What can you do to separate yourself from groupthink? Do you even care that what you think might be a manifestation of groupthink? Do you respond as the group does by 11:30 a.m.? You can be in the group’s wrong place at the wrong time or in the right place at the group’s wrong time.
The market is a model of groupthink. Something initiates a downturn (or upturn), and suddenly people are jumping to join in the trading. Individuals can lose their identities and wealth as they conform to the movement du jour. “This is not a fair assessment!” you exclaim. “All those people had a very personal and individual stake in the trend of the market on that bleak October day. Each was acting individually to save his investment; each tried to avoid loss.”
You are correct, of course, but that is only part of the story. The loss of individuality came as not in the form of just one or a few people, but rather as a large group that thought the same way. By 11:30 a.m. their thinking had undercut the market so much that not even J. P. Morgan and other bankers—who subsequently had injected money into the system to stop the damage—could prevent the larger crash. Think about that. By 11:30 a.m. a large segment of investors acted in unison and panic.
Groupthink works very fast on a vast number of people. And today, with our more sophisticated interconnectedness, it spreads both emotions and ideas more rapidly and more extensively than anyone reading tickertape back in 1929 could imagine. Groupthink here is groupthink there in minutes. Place is irrelevant when one joins the group.
Of course, there are those who recognize a particular instance of groupthink as it occurs, and they enjoy some freedom from mob decisions. But to some extent all of us are like those in a rapid sell-off before 11:30 a.m., people who think and act because others, nameless others, are thinking and acting. Do we individually act with the group as a matter of self-preservation? Is it a matter of passive conformity? Is it just a matter of taking generalizations and applying them specifically? And how do we know when our thinking isn’t groupthinking?
Forget stock market economics for a sec. Acting to save your money is prudent, so when a financial crisis occurs, regardless of the number of people involved you have to take self-serving steps even when such steps are imitative. But consider any aspect of your life, such as whom you follow, whom you disdain, and whom you praise. What can you do to separate yourself from groupthink? Do you even care that what you think might be a manifestation of groupthink? Do you respond as the group does by 11:30 a.m.? You can be in the group’s wrong place at the wrong time or in the right place at the group’s wrong time.
RSS Feed