Herd Mentality

In every age, culture and religion, people have a tendency to follow the crowd in the hope that somewhere at the front of the line is a leader who knows what he/she is doing.

When I was a lot younger, my older brother would suggest that we try walking along a busy avenue while pointing our fingers up at the sky or the side of a building as a prank. He was convinced that in no time at all we would have a crowd of on-lookers who would stop to stare at the same spot that we were pointing at.

If there are enough people in a crowd moving in a certain direction, the sheer force of the number of bodies going in that direction would move everything else along with it. This phenomenon of “momentum” and “critical mass” is understood by everyone who handles or has studied marketing. That is how market moves – up or down.

When enough people believed that the good times were rolling, there was an endless stream of investment, capital, credit, development, and spending, and everyone made money from their investments and felt good about it although not everyone managed to cash in on their paper profits. Few dared or wanted to challenge the status quo or the riskier bets that could upset the apple cart. Those that dared to suggest that greed has overtaken good-sense were quickly ostracized and ridiculed. After all, it is hard to imagine that so many people could be wrong at the same time.

When the size of hedge funds became significant (we’re talking about billions of dollars in some of the hedge funds) and when they, along with short-sellers and day-traders, began placing bets against the likes of Lehman and other publicly traded institutions, the sheer magnitude of their combined actions wiped out billions from the market valuations of their targets.

When corporations started to outsource jobs as a cost cutting measure, sending the jobs to cheaper off-shore locations while laying off American employees, others followed just to be cost-competitive, forgetting that by delivering better services and products and creating awareness that they help maintain US jobs, they can ‘turn the tide’ and effectively compete for the minds and wallets of Americans.

My rant here is not just about the herd mentality or the number of people going down the same path. My point is that there are not enough independent thinkers. There are not enough people who take the time to understand or to simply ask the questions: who, what, where, why, when, and, more-importantly, what-if?

True, some of us already have too many distractions and responsibilities to handle and, for good or bad, we hope that someone in a leadership position actually knows the answers and they are good ones. After all, that is what the ‘leaders’ have been paid or elected to do. We simply can’t do everything ourselves and we have little choice but to trust in the professionals to do their job. That having been said, I can’t think of a good reason why we are not asking the right questions or what prohibits us from asking those very simple questions.

Alas, some in the news media have stopped asking the necessary questions while others have lost their independence and ability to challenge the elected officials, the powerful, the rich and the popular thinking. For this reason, I applaud the New York Times and other web-enabled news media for allowing the masses and the thinking people to voice their feelings and to comment on various issues and topics of concern that we are faced with everyday so that “We the People” are heard. This new form of expression is at once liberating and empowering. While contributors and columnists continue to express their opinions and thoughts, their writing is enriched by the counterpoints and thoughts of their readers from around the world.

Popular thinking is an incredible force that one has to reckon with on a daily basis. What is popular may not be what is right - it is simply what the majority believes in at a given point in time – and as it is with all things, can change. I’ve always maintained that in many cases, the only difference between right and wrong is the belief of the majority over that of the minority. In a society where more people are left-handed, the right-handed ones would be considered as ‘goofy’.

Hang up on the ‘herd mentality’ and start asking questions.