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Herd mentality

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Playing follow the leader is fun as a child, but blindly following others as an adult can be disastrous. Nonetheless, it occurs every day in all walks of life. Being part of the crowd is much safer than going out on a limb. So we tend to conform to conventional wisdom as there’s strength in numbers.

Moving in lockstep with peers was one of the causes of the Global Financial Crisis. Bank after bank after bank slavishly ran with the mob down the sub-prime loan path. Investing in poor quality loans became fashionable based on the flawed logic that “everyone is doing it and everyone can’t be wrong”.

Borrowers also displayed “irrational exuberance” with many American households joining the stampeding herd on a speculative frenzy to buy an overpriced property. What was supposed to be a safe bet turned out to be a financial calamity for millions of homeowners when the housing bubble burst.

Taking cues from others occurs in all areas of business. Indeed, it’s easy to see what’s in vogue in the corporate world. You need only look at the high-priced conferences and conventions for each industry sector to gauge the prevailing trends and hot topics.

Keynote speakers and other “experts” share their wisdom with the assembled throng. Impressionable delegates readily embrace ideas that sound right or appealing without subjecting them to serious challenge or scrutiny. It’s easier to go with the flow than to make independent judgments.

But persuasive podium speakers do not have crystal balls. They are not modern-day soothsayers and typically know little more than the rest of us. Yet many followers succumb to the hype of these “thought leaders”, lest they be isolated from the mainstream - but not me.

For years I have refused to jump on the “cash is going to disappear soon” bandwagon. Even though I have been beckoned by the herd to get on board, a sober assessment shows that cash remains a major method of payment and store of value throughout the world.

In the US, the value of currency in circulation is at its highest level, relative to GDP, since the 1950s. In Australia, the value of banknotes in circulation as a share of GDP is at a 50-year high. Over recent years, the ratio of cash to GDP has also grown in Japan and the Eurozone. Despite expert predictions to the contrary, we won’t be saying goodbye to cash any time soon.

Nor will human workers be consigned to history. Yet the speaker circuit is replete with scaremongers warning that we will all be replaced by robot workers. People are being tricked into fearing artificial intelligence (AI) to the point where some in the human herd fear extinction from robots that turn rogue.

I challenge this mortal danger scenario and am happy to throw a big bucket of cold water on the sensational claim that robots are going to take over the world. I will undoubtedly be shunned by some in the tech-herd for not falling into line, but I refuse to be hoodwinked by robotic nonsense and I am not alone.

Michael Littman is a professor of computer science at Brown University. He readily acknowledges that every new technology brings its own nightmare scenarios and that AI and robotics are no exceptions. In an opinion editorial, Rise of the Machines is Not a Likely Future, he states:

Let’s get one thing straight: A world in which humans are enslaved or destroyed by superintelligent machines of our own creation is purely science fiction. Like every other technology, AI has risks and benefits, but we cannot let fear dominate the conversation or guide AI research.

Professor Littman views dread predictions of computers suddenly waking up and turning on us as unrealistic. He concludes his editorial by imploring that we “please keep the discussion (about AI) firmly within the realm of reason and leave the robot uprisings to Hollywood screenwriters”.

I congratulate Professor Littman for his rational assessment and for being a voice of reason in a crowd that seems hell-bent on promulgating a pending AI apocalypse. That crowd includes Silicon Valley and tech-CEOs whose perceived expertise draws others into their “me-too” groupthink.

The world would be a better place with more independent and informed thinkers - particularly when it comes to politics. The frightening rise of populism in politics is another example of herd mentality. Herds are easily influenced by political leaders and demagogues and this has driven angry populist uprisings.

The current day peddlers of populism are appealing to the prejudices of crowds by tapping into prevailing anti-immigration and anti-trade sentiments. But the populist framing of problems invariably leads to the wrong policy responses such as the desire to build walls and erect trade barriers.

When all is said and done, humans will always be herd animals. It’s part of our DNA and a throwback to our ancestors’ need to band together to survive in the wild. But we can choose not to automatically run with the pack, when necessary. It’s challenging, but it can be done.

Take it from one who knows - it’s far more interesting being the sheepdog than the sheep.

Paul J. Thomas, CEO


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CEO Paul Thomas