30 Aug 2013
The British football season is back. After a few weeks’ break, perhaps spent on surprisingly hot beaches, the fans have returned to the comforting warmth of whichever partisan crowd they belong. The Latin for crowd is “vulgus” and the word “mob” derives from “mobile vulgus” meaning, roughly, a movable (or swayable)crowd. When waging war, nations need to mobilize their armies – effectively to persuade crowds of generally quite harmless people to unite with the intention of killing other people. Armies are notoriously intolerant of any individual considered to be breaking rank. In WWI, the British executed 306 men for “desertion”. Almost all were young men from non-commissioned ranks and their punishment was seen as exemplary in the most sinister way. DH Lawrence, who was, awkwardly, a pacifist married to a German, wrote of the “vast mob-spirit” of the war. Those lucky enough to survive WWI were sent home to lives of economic uncertainty and a widespread fear of Bolshevism, which meant that organised labour was regarded with hostility by what we can call the ruling classes. The hindsight of history judges that the ordinary “heroes” of WW1 were treated pretty shabbily. Their experience was called being “demobbed”. Crowds are needed to fight wars and insult referees but what else are they good for? Political extremism and hard-line religion spring to mind. Come to think of it, these sometimes result in wars too. In all cases, the crowd induces people to behave in a way that might not seem obvious or even wise to according to rational introspection. This is an investment website and it must be obvious where I am heading but there is one general point that I would like to emphasise: crowds are comforting to belong to and can be uncomfortable (to say the least) to be excluded from. This leads straight to what is, in my view, the saddest sentence ever written about professional investors. “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” J M Keynes (The General Theory…) What a bleak observation of human mediocrity. Long before Keynes (in 1841), a Scot called Charles Mackay published “Extraordinary Popular Delusions and the Madness...