Personally, I think we are a bit dumb. That’s a little harsh, but I don’t think us humans – that’s me, and I assume you – are very well equipped for the modern world. We weren’t designed for modern living. I also find it extraordinary how some ridiculous ideas can gain so much traction, such as… I don’t know… that the world will end today. Here is another one: that subprime mortgage securitisation was a good idea. Still I guess that’s why we have bubbles, why the markets are not always right, and why savvy investors can beat the markets.
As I understand it, there is no reason to interpret the Mayan Calendar as predicting the end of the world today. The Mayan calendar runs over a period lasting around four and half thousand years, and today is apparently the day when it just happens to reset. It is no more significant than that day when we jumped from 31 December 1999 to 1 January 2000. Okay the FTSE 100 peaked on 30 December, but the Millennium bug proved to be baloney. The only significance of the end of the millennium was purely psychological, nothing else. Besides, or so I believe, the Mayans didn’t allow for leap years, and if they had their calendar would have reset years ago. In any case the date 21 December signifying the end of the Mayan calendar is only a guess. We don’t know for sure when the Mayan Calendar resets. Despite this, we get a kind of worldwide hysteria, and groups all over the planet convince themselves the world will end today. I guess I am being a bit naughty here. After all, if I am wrong, then frankly I will have other things on my mind, other than the fact my argument was disproved. But then again, I am pretty sure you agree with me.
So, if millions of people across the world can get sucked into this idea, what other ideas can they be sucked into? If we really are so gullible, what other madcap ideas do we buy into?
Here is one: I happened to listen to radio two the other day, and heard a very articulate person giving advice based on someone’s star sign. Don’t you think it is puzzling that in the 21st century people still take this seriously?
Of course, the economist Galbraith once said the only redeemable benefit of economic forecasting is that it makes astrology look respectable.
Personally, I think the problem lies with our evolution. Anthropologist Robin Dunbar reckons we are designed to live in communities of 150 (actually it is 148,) but the media have rounded the Dunbar number up. He reckons language evolved to create bonding within our community, as the physical grooming applied by chimps was only effective within communities of 50 to 80.
So let’s say we live in a community of 150, and we know everyone really well. Our survival depends on a kind of group identity, and group loyalty. As one archaeologist, studying that time in our history, said: “There would have been no room for individual iconoclasts back then.”
You may be familiar with the studies of Solomon Ash, which show how we are inclined to agree with the crowd – even when the crowd is clearly wrong. That may be down to our evolution: sometimes group compliance is vital for our survival. It can work both ways of course. Consider Nazi Germany and the spirit of the blitz as examples of group compliance working in quite different ways.
We are also lousy with probability. Studies show that we are just not good at seeing the big picture. So we interpret data that is in no way conclusive as suggesting some kind of overwhelming threat. Some call it the problem of small numbers, or the problem of induction. Think back to the MMR scare, when the three in one jab was boycotted by many because of flimsy evidence showing some people showed signs of autism after receiving the jab. The truth is that the age when the jab is administered happens to coincide with the age when autism tends to show up. There was no real evidence at all.
Psychologist and Nobel Laureate Daniel Kahneman reckons that we have two ways of thinking: a kind of fast intelligence, which is intuitive, and one that is slower but more methodical and logical. The problem, he says, is that our intuition is often wrong, but that our more logical way of reasoning is lazy and tends to defer to our more intuitive thoughts.
I put it this way. Homo Sapiens means wise man. And for 95 per cent of our existence, when we lived as hunter gatherers, we were indeed wise. In the modern world, I am not sure we are so wise. Our inability to take climate change seriously, claiming it is a myth at every opportunity despite overwhelming scientific evidence to the contrary, is an example of this in action. And our tendency to run with the crowds, which is why we have both wars and stock market bubbles, is another example.
Still, when all around people are mad, there’s an opportunity for the sane investor. But there are two snags. Firstly, as Keynes once said: “The markets can remain irrational longer than you can stay solvent”, and secondly, who is to say that you aren’t mad too?
These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees