A lot of wisdom in this excerpt from Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics:
… if there is one thing we know about the sentiments of crowds, it is that they change. Today it is greed. Tomorrow it is fear. But rarely is it doubt. So, when mass sentiment goes negative, it goes completely negative. People stop worrying about the return on their money and begin to be concerned with the return of their money.
Were witches losers in a reproductive game?
Speaking about the great which hunts, in Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics, Will Bonner writes:
But there’s another sense in which the witch trials turn out to be about sex, after all. You could see them as a variation of the reproductive game, only this time not centering around the winners but centering around the losers—the kind of people it would be easy to blame if anything did go wrong somewhere.
Most witches were alienated from ordinary family life’t hey were seen as different by their neighbours; they were disliked and feared. It was easy for a housewife to imagine that the childless old woman in the shack outside her home was eaten up inside with envy and ready to do her in. Even more important, the outsiders often had land that could be grabbed if they were convicted.
… Witches were feared as plague spreaders, as poisoners, and as workers of black magic on the community. They were the losers in the reproductive game.
… And that is the problem with the neocortex. It can always find plausible reasons … cunning justifications … and impeccable logic to do what it means to do anyway, and means to do for the most senseless of reasons.
In fairness this is only part of Bonner’s explanation of the witch hunts. The other part is largely the same one Charles Mackay lays out in Extraordinary Popular Delusions and The Madness of Crowds.
It was not illiterate fools who drove the persecution of the witches. It was the bigger semi-literate fools. It was not what people did not know that proved their undoing; it was what they thought they knew that wasn’t so.
While I’m not sure of the math, I enjoyed this quote from Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics:
Ignorance increases the square of the distance from a given event, so the odds that things won’t work out the way you expect must be multiplied by the squares of all the intervening events.
It reminded me of what Peter Bevelin Wrote in Seeking Wisdom:
The more independent steps that are involved in achieving a scenarios, the more opportunities for failure and the less likely it is that the scenario will happen. We often underestimate the number of steps, people, and decisions involved.
Add to this that we often forget that the reliability of a system is a function of the whole system. The weakest link sets the upper limit for the whole chain.
None of us really likes honesty. We prefer deception —but only when it is unabashedly flattering or artfully camouflaged. Groups seem to need to believe that they are superior to others and that they have a purpose greater than just passing along their genes to the next generation. Individuals seem to need similar delusions—about who they are and why they do what they do. They need heroes, however fraudulent. People ask actors who play doctors on television what they should do for their ailments, although they know perfectly well that the actors are just playing a role. Studies show that people are more likely to accept the opinion of a confident con man than the cautious view of someone who actually knows what he is talking about. And professionals who form overconfident opinions on the basis of incorrect readings of the facts are more likely to succeed than their more competent peers who display greater doubt.
What’s more, deception works best, according to studies by psychologists, when the person doing the deceiving is fool enough to be deceived, too; that is, when he believes his own lies. That is why incompetent leaders—who are naive enough to fall for their own guff—are such a danger to civilized life. If they are modern leaders, they must delude themselves into thinking they know how to make the world a better place.
— Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics
Further in the book, Bonner writes:
Like all world improvers, Che (Guevara) claimed a remarkable ability to look into the future and then improve it before it happened. Of course, we all try to peek ahead and try to avoid traffic collisions and bad restaurants, but only a chump thinks he knows best how to improve the entire planet.
In Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics, Will Bonner writes:
…you don’t win by predicting the future; you win by getting the odds right. You can be right about the future and still not make any money. At the racetrack, for example, the favorite horse may be the one most likely to win, but since everyone wants to bet on the favorite, how likely is it that betting on the favorite will make you money? The horse to bet on is the one more likely to win than most people expect. That’s the one that gives you the best odds. That’s the bet that pays off over time.
And here is Charlie Munger speaking about the same topic:
The model I like to sort of simplify the notion of what goes on in a market for common stocks is the pari-mutuel system at the racetrack. If you stop to think about it, a pari-mutuel system is a market. Everybody goes there and bets and the odds change based on what’s bet. That’s what happens in the stock market.
Any damn fool can see that a horse carrying a light weight with a wonderful win rate and a good post position etc., etc. is way more likely to win than a horse with a terrible record and extra weight and so on and so on. But if you look at the odds, the bad horse pays 100 to 1, whereas the good horse pays 3 to 2. Then it’s not clear which is statistically the best bet using the mathematics of Fermat and Pascal. The prices have changed in such a way that it’s very hard to beat the system.
And then the track is taking 17% off the top. So not only do you have to outwit all the other betters, but you’ve got to outwit them by such a big margin that on average, you can afford to take 17% of your gross bets off the top and give it to the house before the rest of your money can be put to work.