How Crowds Go Wrong

William Bernstein's exploration of periods of mass hysteria shows how we fall for convenient stories and badly project the future.

Photo by Rob Curran on Unsplash

The Delusions of Crowds examines periods of group madness to understand how groups go wrong. Ideas catch on and spread like viruses, and they’re not limited to one area of life.

Author William Bernstein argues that group manias like the witch hunts and the 1920s stock market bubble are more alike than they may appear:

“While religious and financial manias might seem to have little in common, the underlying forces that give them rise are identical: the desire to improve one’s well-being in this life or the next. And the factors that amplify the contagion of financial and religious mass delusions are also similar: the hardwired human propensity to imitate, to fabricate and consume compelling narratives, and to seek status.”

The witch hunts began with religious fears of ungodly witches and horrific stories about cursed children. Searching for these witches led to neighbors accusing each other to avoid the wrath of the crowds hungry for a witch to burn.

The stock market bubble was a collection of stories about assets that could only go up in value and a new age that would never again know poverty. Traders who continued buying stocks and pushing their values unrealistically higher led to a crash that would impoverish millions of Americans and people across the globe.

The simple ingredient to igniting a new wave of mass hysteria is a compelling story.

How Stories Slip Past Our Thinking Minds

That stories are more convincing than facts or figures isn’t new information. What Bernstein found was much more interesting:

“Not only do people respond more to narratives than to facts and data, but preliminary studies demonstrate that the more compelling the story, the more it erodes our critical-thinking skills. This research suggests, in addition, an inherent conflict of interest between the suppliers and consumers of opinion: the former wish to convince and will devise the most compelling narratives possible, whereas the latter, if they are rational, should intentionally avoid those narratives and rely only on data, facts, and analytical discipline.”

The conflict of interest is crucial to understanding how mass panics spread.

There is so much to gain from a media career built on scaring people into following one writer’s prognostications. Being the go-to source of information for dedicated groups of people is profitable for anyone who’s able to swing it.

Church fathers or leaders of high finance may be able to capture large audiences with wild promises and grand stories. But today, an online warlord like Nick Fuentes can use his charisma to build a passionate and profitable following. We’re flooded with information and stories trying to organize it all. Worse still, stories are targeted at us based on what is most likely to resonate with us.

We have access to more information than we’ve ever had, and we’ve made ourselves more susceptible to hysteria.

Extreme Predictions Are a Tell

In an age of easily scalable hysteria, there’s no shortage of extreme predictions about the world. Those predictions are more than just mistakes. In certain industries, they’re symptoms of bubbles:

“The fourth and final symptom of a bubble is the appearance of extreme predictions, such as the South Sea forecasts of Spain miraculously ceding its New World trade monopoly to England, investments of £100 yielding hundreds in annual dividends, the railway’s impending ‘lordship over time and space,’ or Raskob’s implicit projection of 25 percent annual market returns.”

It’s easy to believe that the world will continue going in the same direction. Whether it’s a continuing boom or unfathomable despair, the world seems like it will never change until it does.

Rarely does that feel hopeful. Change is scary. We like our patterns and our routines. Even a positive upheaval is filled with uncertainty.

There’s no single way to confront this uncertainty. But we know the one mistake to avoid is to form a mob against innocent people as we rail in fear and anger at a world we demand conform to our vision of it.