Herd Mentality

by Ed

herd mentality Herd behavior is the term used to describe situations in which a group of individuals react coherently without there being any coordination between them. Usually used to describe animal behavior, it also describe human action when it comes to investing, stock market activity. I was inspired to write this post when I read the “Our Daily Bread” on the 17 of April 07.

Near the village of Gevas in eastern Turkey, while shepherds ate their breakfast, one of their sheep jumped off a 45-foot cliff to its death. Then, as the stunned shepherds looked on, the rest of the flock followed. In all, 1,500 sheep mindlessly stumbled off the cliff. The only good news was that the last 1,000 were cushioned in their fall by the growing woolly pile of those who jumped first. According to The Washington Post, 450 sheep died.

This event happened sometime in 2005. Strange that animal behavior is used to describe human behavior. You and I know that it is true. Most people follow the crowd. Financially however, following the crowd can be disastrous. Just like the first sheep that jumped off the cliff, you could be committing financial suicide. The majority of the people have too much debts, used too much credit, buy the wrong things, retire almost broke, etc. etc. Don’t follow the crowd.

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