Photo: Petr Kratochvil. Source: Public Domain Pictures
“Social Proof” happens when we rely on the views of group we’re with to form our own opinions. Everyone is strongly influenced by people that they’re with. A researcher once had some college students match the length of a line on one card to one of three alternatives on another card. When subjects worked alone, almost all of them made the correct choice. But when they were put into a group that had been instructed ahead of time to deliberately select the wrong line, over a third of the subjects would “go along to get along.” They made the wrong choice, too – despite their misgivings. They didn’t want to be disagreeable.
For investors, it can be dangerous to “go along.” We need to do our own research and form our own investment plans – plans that work for our own personal circumstances. If everyone thinks alike, someone isn’t thinking. How do we avoid acting like a herd of lemmings charging over a cliff?
One way to avoid social pressure is to write down your decisions. Researchers found that subjects who committed their conclusions to writing before they discussed them were far more likely to stick to their guns rather than be swayed by the group. A journal is also a good way to review what you do and why. Our memories often play tricks on us.
Another way to maintain independence is to be positive and polite. Disagreeing doesn’t have to make you disagreeable. If you have good relationships, you’re more able to ask tough questions and challenge the consensus without being obnoxious. A strong team knows how to respect each other’s differences and still stay cohesive.
Photo: Rawpixel. Source: Pixabay
People work together because we want to. We can accomplish a lot more when we cooperate than we can by ourselves. When we know we’re respected, we’re far more likely to use our disagreements as way to make our groups even stronger.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”