Edwards: Why the big secret? People are smart. They can handle it.
Kay: A person is smart. People are dumb.
(Will Smith & Tommy Lee Jones — Men in Black)
I’m a big fan of James Suroweicki’s The Wisdom of Crowds. I really like Wikinomics: How Mass Collaboration Changes Everything by Don Tapscott, and The Collaborative Habit by Twyla Tharp. I believe that “we” know more, and can accomplish more, than any “me.”
But… there is another side to this equation. Call it “The Stupidity of Crowds.”
I keep thinking about this as I ponder the oil-rig disaster, and the Wall Street meltdown. I already quoted a portion of this section from The Big Short by Michael Lewis in a recent blog post, but, to refresh our memory (with a little more of the quote this time – note: Danny and Vinny were colleagues of Steve Eisman, one of the main characters in the book):
This is a fictitious Ponzi schmene. In Vegas the question lingering at the back of their minds ceased to be Do these bond market people know something we do not. It was replaced by, Do they deserve merely to be fired, or should they be put in jail? Are they delusional, or do they know what they’re doing? Danny thought that the vest majority of the people in the industry were blinded by their interests and failed to see the risks that had created. Vinny, always darker, said, “There were more morons than crooks, but the crooks were higher up.”
This has been called by many names: Groupthink, The Herd Mentality — but here’s what I think. When everyone says “this is true – this is what you can count on,” it takes a lot of courage – a whole lot of courage! – to say to the crowd: “are you crazy?”
For one reason, the crowd may be right. So, in labeling the crowd stupid, you may be wrong. For another, even if the crowd is wrong, and stupid in their wrongness, it may cost you your reputation, your social standing, your friendships to stand up against the crowd.
But when the stupidity of crowds actually does the people in the crowd harm, it really, really is time for the courageous few with sight and insight to stand up and say – ENOUGH!
Unfortunately, we usually only hear about the few who say no after the fact (like the Burry and Eisman stories in The Big Short). During the actual madness, no one is listening to them – the noise of the crowd vastly outweighs and drowns out the courage of the few.
And so, sadly, all too often, we are at the mercy of the stupidity of crowds. Not a good place to be.