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The Actuary The magazine of the Institute & Faculty of Actuaries
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Book review: Mobs, Messiahs and Markets



The title of Mobs, Messiahs and Markets might lead one to expect a book of ‘three thirds’, but it is in fact a book of two halves: one bad, one good. Unfortunately, the bad half accounts for over 90% of the pages.

This first ‘half’ consists of a general tour through some of the many fields of life relating to delusional behaviour, from the obvious aspects of financial bubbles of various types to the mass followings accorded various dictators, pundits and, more abstractly, ideologies and fashions.

Readers expecting any deep consideration or analysis of the origin of such phenomena are likely to be disappointed, as the book tends to move from spectacle to spectacle without much pause for thought. Readers expecting to be entertained by assorted exhibitions of human folly may or may not find themselves satisfied, depending on their taste for Schadenfreude, amusement at the expense of others’ misfortunes.

Many of the book’s expositions of mad mobs, mad (would-be) messiahs and mad markets are presented in a supercilious vein of contempt for those without our benefit of hindsight. This is unedifying and uninspiring: I find Schadenfreude one of the most contemptible of man’s attitudes, although I suppose it does serve the socially therapeutic purpose of making the insecure feel better about themselves.

Towards the end of the work, the tone changes for the better. We start to encounter perceptive observations about the nature of crowd behaviour, the primary driver of the mass delusions underlying the book’s title.

The authors refute the recent contention of ‘the wisdom of crowds’: empirically with reference to such events as the popular support for Hitler, which soon turned into tacit consent for the Holocaust; theoretically by considering the difference between a crowd and a group. The authors distinguish crowds and groups in this way: a group comprises a collaborative collection of individuals who actively combine but respect the presence of differing views in the group, whereas a crowd is simply a collection of people who have not sought to be together, their ‘union’ resulting purely from some common feature such as nationality, but these people quickly settle on one view as if one organism.

Why do crowds act so ‘unidirectionally’, and in a direction that always seems — at least after the event — to be wrong? The problem boils down to the root nature of human psychology: “man’s greatest need is not to be right; it is to have the approval of his fellow men. He would rather be wrong following the leader than right on his own”. This, combined with the almost invariable inexpertise of any so-called expert opining on matters like housing markets, stock selection or the security threats from suicide bombers, can quickly lead to mass thinking pointing in one broad, and wrong, direction.

The final chapter closes the book with a more noble tone than that of the previous chapters; the Schadenfreude is gone, the authors bring in their heroes for admiration (Jesus Christ and Muhammad Ali make an interesting pairing here) and conjecture on the extent to which some moral dimension might help to deflate our bubbles.

So how do we attain the wisdom to avoid delusion and dupery? Essentially, by thinking for ourselves as we travel the long, stony road of life. This sounds trite, but it is not: thinking for ourselves is something we do surprisingly rarely, as we tend not to appreciate how much our frameworks of reference are set by the prevailing assumptions of our peers and our culture. The path to wisdom is not easy; in the authors’ words, “you pay, you suffer, you sweat and strain; but you become wiser.”

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Matthew Edwards is a former editor of The Actuary.

For other reviews by him on books relating to financial crises, see www.the-actuary.org.uk/693751 and www.the-actuary.org.uk/841034

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