19 November, 2020

If 50 Million People Say Something Foolish, It is Still Foolish

After a concert you go to the coat check and see people in front of you leave a tip although it is already included in your purchase price. What do you do? Probably leave a tip. During the concert, after a solo, one person starts to clap and suddenly the whole audience joins in.


These are two examples of an ingrained human behavior called “Social Proof”, (sometimes called “herd instinct”) which is how individuals feel they are behaving correctly when they act the same as other people.


This is from a fascinating book I’ve been reading called “The Art of Thinking Clearly” by Rolf Dobelli. The book talks about 99 different ingrained human biases that cause us to make some highly irrational choices.


Comedy shows with canned laughter are using social proofing to get the audience to laugh. Advertisers regularly use terms such as “the most popular”, “best seller and best rated” to describe their product. The product is often almost the same as others, but we prefer to buy the most popular. 


What happens when media and your friends continually talk about a hot stock or hot sector that has been going up? This investment can be totally at odds with your normal comfort zone, but nevertheless you often buy anyway, not wanting to “miss out”.


Why do we act like this? According to Dobelli, it relates back human survival tactics that are imbedded in us. Say its 50,000 years ago and you are with your hunter gatherer friends and they all run off quickly. You can either stay put and figure out why your friends bolted (is there a hungry lion nearby?) or immediately run off yourself. If you do not run off, you have a good chance of exiting the gene pool quickly. We are all descendants of those who ran off. 


The moral here is that just because a product is the most popular it would be wise to remember English novelist W. Somerset Maugham’s wise words: “If 50 million people say something foolish, it is still foolish.”