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Can a million people be wrong?

April 21, 2009

Yes they can!

Its nothing new. At one time, millions of people believed the earth was flat. That General Motors was THE stock to keep. And that 64Kb of RAM was more than enough for a home computer.

The argumentum ad populum ploy is common tactic in the high-pressure salesman’s bag of tricks. A million people bought their health insurance from us, they’d say. Are you telling me they’re wrong?

If you’re not critical minded enough, you might just get pushed off balance and find yourself snookered, and then screwed, simply because you hate being the odd one out. That’s how ad populums work. As kids, lots of people paid a painful price for non-conformance. We’re well trained to move in herds on mere suggestion. 🙂

But we’re not kids anymore so I recommend this to everyone: learn to apply the logic test to any assertion that people heap on you. Here’s a guide on logical fallacies on Wiki.

One caveat. In my opinion business is 40% logical, 60% emotional. No matter how strong your fundamentals are, hype and rumors can and will affect your stock value. So the idea is not to get rid of hype entirely (you’ll need some of it to get your products known) but to know how to harness sentiments to your favor. And to know when someone is trying to sell you snake oil.

A bit of confession. I was never much of a conformist myself, even in school. Okay, I will do things if it helps me avoid having to go to the principal’s office but not because some groupie tells me to. I don’t know why but I had a disdain for the herd. It didn’t exactly make me a popular kid but I slept well at night.

Years later, looking at how some of my high school friends are doing, its clear to me that choosing conformity without the logic checks – and I mean the idea that I should believe in something because a million people can’t be wrong – does not always bring me where I want to go. This is where logic filters have worked like a magic charm for me. It has protected my little business from potentially harmful groupthink.

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2 Comments leave one →
  1. April 21, 2009 10:43 am

    Same thing happens in investment particularly real estate and stock. Most people are too lazy to think or do their own research, and they invest what others think is good. When things are not going their way, they start to panic and sell. These people are always under tremendous amount of emotional stress because most things are not within their control – they’re following others, remember?

    That’s why for me, in certain cases, I will just stand firm on my ground even though the whole world is doing exactly the opposite. Because I have confidence in whatever I choose to do. If I screwed up, well, too bad then. At least I can learn from the mistake.

    Its good to pick up all the signals on the ground, including the trash. What’s critical is whether your system can pick out the trash from the gems.

  2. April 21, 2009 1:53 pm

    Go play with the Lemmings. That will remind you about following the crowd… heheh

    Yeah, looks like we’re a mix of chimp (97% shared DNA) and lemming (propensity to herd).

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