(1) Answer the questions on the conversation prompt discussed in class. (your blog)
[Questions]
Read the following quotes taken from Chapter 3 of What I Wish I Knew When I Was 20.
With your partner discuss the questions below.
“The rules made by society are a huge presence in our lives, created by the government, religious groups, our employers, our schools, our neighbors, and our families. Because these social groups craft the explicit rules around us, we often find ourselves in situations where we are driven to break them to satisfy our personal desires or the drives of our species.” p/33
“Everyday, physical signs tell all of us what to do, written instructions direct us how to behave, and social guidelines urge us to act within specific parameters. In fact, we also make lots of rules for ourselves, in large part encouraged by others. These rules become woven into our individual fabric as we go through life.” p/33
“We draw imaginary lines around what we think we can do – lines that often limit us much more than the rules imposed by society at large.” p/33
“We define ourselves by our professions, our income, where we live, the car we drive, our education, and even by our horoscope. Each definition locks us into specific assumptions about who we are and what we can do.” p/34
“We always make our own prisons, with rules that we each create for ourselves, locking us into specific roles and out of an endless array of possibilities.” p/34
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Do you agree with these quotes?
-Yes, I do. I also agree with the fact that our specific roles are ultimately from our own decision though.
When is a rule really just a suggestion? And when do suggestions morph into rules?
-Actually I cannot figure out what this question means exactly. What I can make sure is considering something as either rule or suggestion absolutely depends on the individual. If someone don’t follow some rules, they are not ‘rules’ for someone anymore but optional suggestions which he or she can decide to follow.
What are the consequences – good and bad – of getting “off the prescribed path” (breaking the rules)?
-The good point is encouraging to come up with creative idea.
The bad point is that it could be dangerous not to be proved safe.
What happens to those who break the rules?
-Maybe they can lose or spoil their valuable relationship.
(2) Post an example of the ‘herd’ mentality in action. [e.g.] photo or video (your blog)
Trading Psychology – Herd Mentality
Herd Mentality results in the dilution of I.Q. by the members of a group. This dilution increases exponentially with the size of the group and the level of emotion common amongst members. Herd Mentality is the reason why a group of people can abandon reason and descend into madness in a way that any individual of the group would not, it is also a major cause of Contagion. For this reason it is essential to maintain your individuality when investing. In doing so you can objectively observe the herd’s behavior and profit from its stupidity.
Herd mentality is not reserved for the stock market; have you ever watched a riot on TV and seen regular people committing terrible acts of violence with a complete disregard for others? This is a reaction to peer pressure which makes individuals act in order to avoid feeling ‘left out’ from the group.
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Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one! – Charles Mackay
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French sociologist Gustave Le Bon developed a theory called Contagion (different from Financial Contagion). It assumes that crowds exert a hypnotic influence over their members. People find themselves in a situation where they are anonymous and can abandon personal responsibility. They get sucked up in the contagious emotions of the crowd and can be driven toward irrational, often violent action that most isolated individuals would not attempt.[1] The main flaw in this theory is that crowd behavior is not necessarily irrational.
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The crowd is always intellectually inferior to the isolated individual, but that, from the point of view of feelings and of the acts these feelings provoke, the crowd may, according to circumstances, be better or worse than the individual. All depends on the nature of the suggestion to which the crowd is exposed – Gustave Le Bon
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Another theory to explain Herd Mentality is called Convergence. It suggests that crowd behavior is a product of the convergence of like-minded individuals; that people who wish to act in a certain way come together to form crowds.[2] Floyd Allport, a man considered the founder of social psychology said “The individual in the crowd behaves exactly as he would behave alone, only more so.” Convergence theory better explains why not all groups of people behave irrationally but does not explain why some people do things in a crowd that they would not have the courage to do alone.
I agree with both theories in part. My research suggests that it is the underlying emotions of the crowd that hold the key to understanding its behavior. If the emotions are negative such as anger, hate, fear, greed etc. then the resulting behavior is best explained by Contagion Theory. As the negativity and the intensity of the emotions increases the resulting behavior is progressively more animalistic and irrational.
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Examples:
- The Netherlands Tulip mania 1636–37
- New York Draft Riots 1863
- The Roaring Twenties and the crash of 1929
- The Black Monday market crash October 1987
- June 2001 riot by Los Angeles Lakers fans after the Lakers victory over Philadelphia in the NBA Finals
- Run on the Bank of England September 2007
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Stock market bubbles and crashes are great examples of Herd Mentality and Contagion Theory. They tend to begin and end with extremes of emotion; frenzied buying (Greed) to cause a bubble and then selling in a panic (Fear) to trigger a crash. Otherwise sensible people act against their better judgment.[3] Individuals don’t want to be ‘left out’ and rush with the crowd into or out of the market.
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The crimes of Nazism are not the crimes of one nation. Cruelty a taste for violence, the religion of force, ferocious racialism, are not the prerogative of a period or of a people. They are of all ages and of all countries. They have biological and psychological bases which it is by no means certain that we shall escape again. The human being is a dangerous wild animal. In normal periods his evil instincts remain in the background, held in check by the conventions, laws and criteria of civilization, but let a regime come that not only liberates these terrible impulses but makes a virtue of them, then from the depths of time the snout of the beast reappears, tears aside the slender disguise imposed by civilisation and howls the death-cries of forgotten ages – Jacques Delarue (The History of the Gestapo)
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However if the underlying emotions are positive such as love, peace, serenity, unity, understanding etc. then the resulting Herd Mentality is better explained by Convergence Theory.
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Examples:
- The majority of weekly Religious Gatherings
- The majority of sporting events
- The majority of music concerts
- Peaceful Protests
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The most significant example of Herd Mentality as explained by Convergence Theory was seen during the Salt Satyagraha. It was a campaign of non-violent protest against the British salt tax in India lead by Mahatma Gandhi. There are reports of over 100,000 people at times marching in a spirit of peace, unity and harmony.[4] These people were suffering racial and financial injustice and had every reason to be angry yet they remained non-violent.
So what has this got to do with making money in the stock market? Well, it’s the emotions of fear and greed that cause the Wall Street herd to behave irrationally. In contrast; Gandhi, through maintaining positive emotions and resisting anger and fear, induced 200 million people to maintain their composure and act with a clear mind. The result was to bring Britain, a world super power to its knees without any violence or financial backing.
To stay separate from the herd we must remain emotionally neutral, resisting both fear and greed. This is only possible when you know that probability is in your favor. Then you don’t need to care about the outcome of a particular trade, you can remain detached from the outcome and let the law of averages run it course.
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If you cannot control your emotions you cannot control your money – Warren Buffett
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A fascinating aspect of Trading Psychology is that when the emotional influence on members of a group is low, Herd Mentality evolves into Group Intelligence.
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Even the intelligent investor is likely to need considerable willpower to keep from following the crowd. – Benjamin Graham
(3) On this day the expression ‘OK’ entered into the American vernacular. What does it mean and who is credited as being the first person to use the expression publicly.
What is the origin of the word ‘OK’?
There have been numerous attempts to explain the emergence of this expression, which seems to have swept into popular use in the US during the mid-19th century. Most of them are pure speculation. It does not seem at all likely, from the linguistic and historical evidence, that it comes from the Scots expression och aye, the Greek ola kala (‘it is good’), the Choctaw Indian oke or okeh (‘it is so’), the French aux Cayes (‘from Cayes’, a port in Haiti with a reputation for good rum) or au quai (‘to the quay’, as supposedly used by French-speaking dockers), or the initials of a railway freight agent called Obediah Kelly who is said to have written them on documents he had checked.
A more likely explanation is that the term originated as an abbreviation of orl korrekt , a jokey misspelling of ‘all correct’ which was current in the US in the 1830s. The oldest written references result from its use as a slogan by the Democratic party during the American Presidential election of 1840. Their candidate, President Martin Van Buren, was nicknamed ‘Old Kinderhook’ (after his birthplace in New York State), and his supporters formed the ‘OK Club’. This undoubtedly helped to popularize the term (though it did not get President Van Buren re-elected).
The only other theory with at least a degree of plausibility is that the term originated among Black slaves of West African origin, and represents a word meaning ‘all right, yes indeed’ in various West African languages. Unfortunately, historical evidence enabling the origin of this expression to be finally and firmly established may be hard to unearth.
(4) Comment, comment, comment!!!
hjinnoh 