Thu 23 Aug 2007
PF Blogger Peer Pressure Continues, Epitome of GroupThink
Posted by RichSlick under Financial Safety
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Wow, more bashing of Trent at The Simple Dollar but this time by JPL at AllFinancialMatters. There are many interesting comments but this one caught my eye, “Consider that the dozens of comments disagreeing with you were made by folks more objective about the way your post reads than you could be, and that some number of these folks could potentially be more savvy than you on the subject.”
The epitome of GroupThink and why those bashing Trent will unlikely achieve the wealth and success that Trent (and others who think for themselves) will over the long run. There are over 40 comments and most of them imply Trent gave the wrong advice. The funny thing is that HIS ADVICE was solicited and not any of the other people commenting on that blog. Sounds like a bit of jealously perhaps?
I think all of these symptoms of GroupThink were covered in JPL’s comments and post.
- A feeling of invulnerability creates excessive optimism and encourages risk taking.
- Discounting warnings that might challenge assumptions.
- An unquestioned belief in the group’s morality, causing members to ignore the consequences of their actions.
- Stereotyped views of enemy leaders.
- Pressure to conform experienced by members of the group who might otherwise disagree.
- Shutting down of ideas that deviate from the apparent group consensus.
- An illusion of unanimity with regards to going along with the group.
- Mindguards — self-appointed members who shield the group from dissenting opinions.
It’s been amusing reading up on it but the important thing right now is to be OUT OF THE MARKET for at least the next month. If you need a reason why, check out this link.
5 Responses to “ PF Blogger Peer Pressure Continues, Epitome of GroupThink ”
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August 23rd, 2007 at 5:36 pm
I don’t think the GroupThink proves anything though. If I went to a Red Sox website and said that the Toronto Blue Jays are going to make a comeback and win the division, the group would probably behave in a similar manner (if they even bothered to respond). Just because the group behaves in a certain way doesn’t make conclusion right/wrong.
On Trent’s site, I noticed there were similar comments to the above posted in support of Trent’s suggestion.
August 23rd, 2007 at 10:12 pm
In a game of baseball, there can be only two outcomes: Red Sox win / Toronot Blue Jays Lose or vice versa. I guess it could end up in a tie so let’s say 3 outcomes.
In financial investing, there are literally hundreds of thousands of scenarios:
1. Invest in stocks, buy and hold
2. Invest in stocks, try timing the market
3. Invest in stocks, cut and run at the first sign of trouble
4. Invest in stocks, use options to hedge
5. Invest in stocks only through mutual funds
6. Invest in stocks individually
I could write thousands of choices and derive millions of permutations on those factors but the groupthink broke down into two components:
1. Buy and hold is the “only” way to go.
2. Trent is an idiot for suggesting anything else than buy and hold.
Yes, there were a few dissenters but not too many and that what my point. In a room full of 50 people the “herd” mentality quickly took over. We all know what eventually happens to herds right? They get slaughtered.
August 24th, 2007 at 8:24 am
First off, who’s this “JPL?”
Trent basically told a lady with obviously little experience to time the market. That is bad advice no matter how many people agree with it or not. It’s just bad advice.
Then when people call him on it, he turns it around like we are attacking HIM, which never has been the case.
August 24th, 2007 at 8:25 am
Oh, and I wasn’t bashing Trent.