We Won’t Be Fooled Again, Surely.
I had a conversation this morning with a friend about Bitcoin and the broader Cryptocurrency situation. I’m certainly not an expert and not sufficiently researched in this regard to form a solid technical opinion, but from the fringes where I stand, it seems like a bubble. Maybe I’m naïve, shortsighted, or indeed too conservative to see the big picture, but when you’ve played to fool for a while it gets tiring. You’re not so eager to jump at everything with bright flashy lights.
I remember just before the 2008 crash; I was driving my van down Waltham Terrace, Blackrock, when a well-known businessman came on a radio interview to talk about the economy. In response to a question regarding the strength of the housing market, he said that he had never seen a rising curve that doesn’t eventually fall. There was more than just this guy warning us of the potential of economic collapse, but like so many others, I ignored it. Blinkers on, head down, party on. Although, with hindsight, I was doing more fire-fighting than partying at that time. Regardless, results were the same for anyone caught in the hype.
Cryptocurrency is one big bright flashy light as far as I’m concerned, and it hasn’t been around long enough to prove itself to me yet. If I want something I can trust, then it has to have a history of standing up to challenge and perhaps play small for a while. Bitcoin has had challenges and seems to have come back stronger every time. It seems too loud, too brash, too bright, too, well, everything. Just like choosing a teammate, or a life partner, or a business partner, I want to know how it performs under pressure. I want to see its true colours. It’s easy to smile when things are going well, but when they’re not, what character shows up? Bitcoin to me is like an enthusiastic 22-year-old in a fast red car at 2am.
Sorry dude, I’m getting a taxi.
My friend and I also talked about Elon Musk and how the market seems to love everything he does. Another example, for me, of what to avoid. If the crowd goes that way, I go this way. Because I’d rather be a dope on my own than be a dope with a crowd of dopes — know what I mean?
My investment strategy is four-fold and simple;
- Whatever the trend, go the other way.
- Do the research — look for established companies with a good balance sheet.
- Buy in the dip.
- Hold for 5 to 10.
Short-term fluctuations don’t bother me, and I don’t watch the market every day. Or maybe I’m too lazy to stay with it and get out when my investments are high. Some of my stocks have gone +600% since last April when I bought in and I watched them come back to earth. I could have got out and secured that profit, then got back in again at a low. Did I miss the boat? Was I too afraid to cash in? Depends on your outlook. I’m comfortable holding tight for another few years… it’s a hare and tortoise kind of thing.
The world’s first Bitcoin ETF began trading on Thursday in Canada and has over $600 mn in assets. Investors seem to love this stuff, but it’s not for me. Will this thing tank and take millions of people with it? Who knows, but it seems likely from my fringe perspective. It’s too bright and shiny — too much like a second-hand car salesman with fluorescent teeth and a wide smile.
A crowd is a servile flock that is incapable of ever doing without a master — Gustave Le Bon, The Crowd, 1895
I hadn’t intended this article to be about Bitcoin or investing. It just kind of went that way. What I wanted to talk about is the human propensity towards stupidity. Bitcoin, like all other carrots dangling on sticks, narrow our focus to such an extent that we don’t see the holes in the road. Blinkered, we follow trends.
It seems that just because everyone else is doing it that it must be safe.
Robert Cialdini, social scientist and father of the psychology of persuasion, suggests it comes down to, amongst other factors, social proof. He says, “human beings rely heavily on the people around them for cues on how to think, feel, and act.” This seems accurate, but should you take and use this knowledge to get one over on others and enhance personal gain? I say categorically, no. But this is how a world built on neo-capitalist ideal operates. And if your personality tends towards narcissism and Machiavellianism, you’re quids-in. It seems you have little choice too. According to Seth M. Spain in Leadership, Work, & The Dark Side of Personality, your behaviour will reflect your character.
Cialdini’s title shouldn’t fool you. He is in the manipulation business, and he teaches business executives these principles. He says that “born persuaders,” find it difficult to say how it is they are able to “persuade,” others. He says “most of them can’t offer much help to those of us who possess no more than the ordinary quotient of charisma and eloquence but who still have to wrestle with leadership’s fundamental challenge: getting things done through others.”
Now, what is this “ordinary quotient of charisma and eloquence,” to which he refers?
Could it be a certain honesty or security in oneself to such a degree that making others do what one wants is not so important? Could it be a realisation that other people don’t exist for the gratification of your self-directed needs?
In an article for HBR, Cialdini warns against the improper use of the psychological principles of persuasion. He says;
…the rules of ethics apply to the science of social influence just as they do to any other technology. Not only is it ethically wrong to trick or trap others into assent, it’s ill-advised in practical terms. Dishonest or high-pressure tactics work only in the short run, if at all. Their long-term effects are malignant, especially within an organisation, which can’t function properly without a bedrock level of trust and cooperation.
Sounds to me like someone who has just handed out instructions on how to build a psychological incendiary device to a room of people, some of whom are pyromaniacs.
I’ve read Influence. I have it on my bookshelf. And as I read, I tried hard to believe that Cialdini revealed his findings for the betterment of humanity. But it simply is not true. His principles promote the manipulation of people towards the superficial ends of narcissists and is more akin to Bertrand Russell’s assessment of propaganda than true leadership. I should say at this point I have a fundamental problem with the whole leadership-followership dichotomy, but I won’t get into that here.
In 1935, Bertrand Russell said the following of propaganda and the hijacking of psychological principles for the advantage of the elite few;
Our system of education turns young people out of the schools able to read, but for the most part unable to weigh evidence or to form an independent opinion. They are then assailed, throughout the rest of their lives, by statements designed to make them believe all sorts of absurd propositions... The art of propaganda, as practised by modern politicians and governments, is derived from the art of advertisement. The science of psychology owes a great deal to advertisers. In former days, most psychologists would probably have thought that a man could not convince many people of the excellence of his own wares by merely stating emphatically that they were excellent. Experience shows, however, that they were mistaken in this. If I were to stand up once in a public place and state that I am the most modest man alive, I should be laughed at; but if I could raise enough money to make the same statement on all the buses and on hoardings along all the principal railway lines, people would presently become convinced that I had an abnormal shrinking from publicity […] Propaganda, conducted by the means which advertisers have found successful, is now one of the recognised methods of government in all advanced countries, and is especially the method by which democratic opinion is created.
The idea that leadership is about making people do things you want them to do is in the worst sense agentic and typical of the self-absorbed personality type that insists on short-term gain for oneself. But I guess that’s just how the world works. As long as there are people looking to others for guidance and direction, there will be those ready to take advantage.
We are addicted to bright shiny things and we seem to take as gospel that which men in red ties have to say. We seem ripe and open to manipulation, and they know it. As French Polymath, Gustave Le Bon wrote in 1895;
We know today, that by various processes, an individual may be brought into such a condition that having entirely lost his conscious personality, he obeys all the suggestions of the operator who has deprived him of it […] these we see are the principle characteristics of the individual forming part of the crowd.
Will we ever change?
I doubt it.