Thursday, October 1, 2009

Avoiding Group Think

So here I am sipping on my caffe latte in Starbucks and I am thinking about something that I read recently at Problogger.

The article basically mentioned why "weak ties" - those ties we have with people outside our normal social circle - might be a more useful source of information compared to strong ties we have with family and existing friends.

The reason given is that people in our social circle usually already share similar values and goals as us. If someone is a teacher, most of their friends will probably be teachers. If you came from a certain junior college, polytechnic or university, your friends that you hang out with are also probably those who have taken the same course as you or were in the same school.

In that sense, the life experiences and exposure they have would have been very similar to yours. That means that they most probably have nothing NEW to offer to you. In addition, because of the need to maintain close ties and come to a consensus, you and your friends will engage in something called Group Think. As they say, highly cohesive groups are likely to engage in groupthink.

If your friends are the partying sort, you will realise that all of them will feel that there is nothing wrong with partying. If your friends are all smokers, they will all have the same attitudes towards smoking. This goes the same way for our financial decisions be it in terms of insurance, investment and the like. The dangers of group think is that we confine ourselves to certain ideas without testing them out in an analytical manner.

Let's take the investment in stocks. Do you use fundamental analysis or technical analysis? What are your approaches and strategy?

Even in the online community, it is easy to engage in groupthink when we find like minded people who will not test out our ideas to see whether it works or not. So sometimes, it pays to find people to argue with. Yes..people who do not accept our ideas!

In this way, we can be exposed to different school of thoughts and learn from people who are not as similar to us in our thinking, actions and behaviour. These "weak ties" will help to strengthen our own thought process and serve as a testing board for our new ideas.

As they say, keep your friends close but your enemies closer.

It is only when we engage people from the opposite camps do we truly grow in terms of our thought process and hopefully our investment decisions.

So next time, try to find some one who disagrees with you and engage with that person. Your goal is not to show him that you are right. Your goal is to listen to his point of view and try to understand why he thinks that way.

The author is trying hard to listen to views from both sides of the FA and TA camp. He tries not to stick to one school of thought unless it works.

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  1. Agreed. It's important to be open to opinions/views and find out what works and what does not from experienced practitioners to shorten our own learning curve.

    When you stopped listening, you stopped improving.

  2. Indeed Wealth Journey. I am trying to learn from everyone. You can also learn things from poor people


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