Monday, February 25, 2008

Mobs, Messiahs, and Markets

Think for yourself and act accordingly.

If I were to sum up the ideas and underlying theme of Bill Bonner and Lila Rajiva's book, Mobs, Messiahs, and Markets, in a single sentence, that would be it.

It's a seemingly simple and succint philosophy, but executing this principle is where the difficulty lies. Because we are subject to the influence and demands of experts and leaders, along with the groupthink of crowds, our ability to reason and stand alone in a state of independence is constantly compromised. At one time or another, we are all subject to the pull of the crowd.

This is the idea that authors Bonner and Rajiva develop, or rather, expound on during the length of this book. This is not a new idea; many readers are likely to recall similar lessons on the dangers of groupthink and crowd behavior, as recorded in Charles Mackay's, Extraordinary Popular Delusions and The Madness of Crowds. What the authors of Markets do is update those lessons and apply them when chronicling some of the widely held delusions and popular manias of our time.

The book rolls along in a kind of acerbic, H.L. Mencken-style prose, with the authors addressing topics ranging from politics and finance, to mass hysteria over media-fueled scandals and events. Their tone is damning as they point out the hypocrisy among both the political left and the right, and in the motivations of the ever-burgeoning crowd of professional do-gooders and "world-improvers".

All this criticism (and more) is richly deserved, and the opening chapters on the methods and stated ideals of the "global agenda" set are a personal favorite. Rajiva and Bonner later build on these opening thoughts, and frequently refer back to them as the similarity between the seemingly disparate fields of politics and finance becomes more apparent. And the bridge that joins these seperate worlds is the idea of the public spectacle, and the effect that it has on our thoughts, emotions, and personal drives.

It seems that many of our actions and ideas are spurred on not by a careful consideration of things we know or are qualified to learn more about, but by simply reducing things we cannot fully understand down to manageable concepts and ideas. Slogans, if you will.

Here are a few examples of the simplified reasoning which lies behind many of our popularly held notions: "Stocks for the long run", "real estate prices never go down", "deficits don't matter", "you are either with us or against us", and so on.

When we get wrapped up in a belief set, or the excitement and consensus-building push of some powerful agenda, these factors and slogans can influence our thoughts and opinions, and shape our actions and decisions. Whether you are deciding to purchase stocks for your retirement fund, or reviewing arguments of a political nature, the selection process and your motivation to act is often influenced by factors of simplification and shared belief.

The crowd, and the crowd manipulator, seeks to reduce its message to the most popularly acceptable form, the lowest common denominator. The individual gives in to crowd mentality or the proclamations of experts and politicians when confronted with too much information and not enough time or reasoning ability to fully comprehend their message, its meaning, and its after-effects.

In time, the widely-held beliefs and slogans can drive a public spectacle, and all the reckless behavior that accompanies it. This holds true for politics, business, the world of finance and investments, and almost any area of human interaction and endeavor.

As the authors point out, the crowd is something that takes over in our minds and grabs hold of our passions. It exists within us, just as it coalesces outside into a raging mob. Learning to recognize the dangers of crowd thinking and behavior, as opposed to constructive voluntary group behavior, is essential to navigating a more successful course in our investments and our daily life.

If you are willing to reflect on this message, and are able to withstand the skewering of many of our society's deeply-held values and "truths", then you may enjoy this book.