Herd Mentality results in the dilution of I.Q. by the members of a group.

[xoxo]

Herd Mentality results in the dilution of I.Q. by the members of a group. This dilution increases exponentially with the size of the group and the level of emotion common amongst members. Herd Mentality is the reason why a group of people can abandon reason and descend into madness in a way that any individual of the group would not, it is also a major cause of Contagion. For this reason it is essential to maintain your individuality when investing. In doing so you can objectively observe the herd’s behavior and profit from its stupidity.

Herd mentality is not reserved for the stock market; have you ever watched a riot on TV and seen regular people committing terrible acts of violence with a complete disregard for others? This is a reaction to peer pressure which makes individuals act in order to avoid feeling ‘left out’ from the group.

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Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one! – Charles Mackay

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French sociologist Gustave Le Bon developed a theory called Contagion (different from Financial Contagion). It assumes that crowds exert a hypnotic influence over their members. People find themselves in a situation where they are anonymous and can abandon personal responsibility. They get sucked up in the contagious emotions of the crowd and can be driven toward irrational, often violent action that most isolated individuals would not attempt.[1] The main flaw in this theory is that crowd behavior is not necessarily irrational.

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The crowd is always intellectually inferior to the isolated individual, but that, from the point of view of feelings and of the acts these feelings provoke, the crowd may, according to circumstances, be better or worse than the individual. All depends on the nature of the suggestion to which the crowd is exposed - Gustave Le Bon

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Another theory to explain Herd Mentality is called Convergence. It suggests that crowd behavior is a product of the convergence of like-minded individuals; that people who wish to act in a certain way come together to form crowds.[2] Floyd Allport, a man considered the founder of social psychology said “The individual in the crowd behaves exactly as he would behave alone, only more so.” Convergence theory better explains why not all groups of people behave irrationally but does not explain why some people do things in a crowd that they would not have the courage to do alone.

I agree with both theories in part. My research suggests that it is the underlying emotions of the crowd that hold the key to understanding its behavior. If the emotions are negative such as anger, hate, fear, greed etc. then the resulting behavior is best explained by Contagion Theory. As the negativity and the intensity of the emotions increases the resulting behavior is progressively more animalistic and irrational.

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Examples:

The Netherlands Tulip mania 1636–37
New York Draft Riots 1863
The Roaring Twenties and the crash of 1929
The Black Monday market crash October 1987
June 2001 riot by Los Angeles Lakers fans after the Lakers victory over Philadelphia in the NBA Finals
Run on the Bank of England September 2007

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Stock market bubbles and crashes are great examples of Herd Mentality and Contagion Theory. They tend to begin and end with extremes of emotion; frenzied buying (Greed) to cause a bubble and then selling in a panic (Fear) to trigger a crash. Otherwise sensible people act against their better judgment.[3] Individuals don’t want to be ‘left out’ and rush with the crowd into or out of the market.

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The crimes of Nazism are not the crimes of one nation. Cruelty a taste for violence, the religion of force, ferocious racialism, are not the prerogative of a period or of a people. They are of all ages and of all countries. They have biological and psychological bases which it is by no means certain that we shall escape again. The human being is a dangerous wild animal. In normal periods his evil instincts remain in the background, held in check by the conventions, laws and criteria of civilization, but let a regime come that not only liberates these terrible impulses but makes a virtue of them, then from the depths of time the snout of the beast reappears, tears aside the slender disguise imposed by civilisation and howls the death-cries of forgotten ages - Jacques Delarue (The History of the Gestapo)

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However if the underlying emotions are positive such as love, peace, serenity, unity, understanding etc. then the resulting Herd Mentality is better explained by Convergence Theory.

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Examples:

The majority of weekly Religious Gatherings
The majority of sporting events
The majority of music concerts
Peaceful Protests

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The most significant example of Herd Mentality as explained by Convergence Theory was seen during the Salt Satyagraha. It was a campaign of non-violent protest against the British salt tax in India lead by Mahatma Gandhi. There are reports of over 100,000 people at times marching in a spirit of peace, unity and harmony.[4] These people were suffering racial and financial injustice and had every reason to be angry yet they remained non-violent.

So what has this got to do with making money in the stock market? Well, it’s the emotions of fear and greed that cause the Wall Street herd to behave irrationally. In contrast; Gandhi, through maintaining positive emotions and resisting anger and fear, induced 200 million people to maintain their composure and act with a clear mind. The result was to bring Britain, a world super power to its knees without any violence or financial backing.

To stay separate from the herd we must remain emotionally neutral, resisting both fear and greed. This is only possible when you know that probability is in your favor. Then you don’t need to care about the outcome of a particular trade, you can remain detached from the outcome and let the law of averages run it course.

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If you cannot control your emotions you cannot control your money – Warren Buffett

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A fascinating aspect of Trading Psychology is that when the emotional influence on members of a group is low, Herd Mentality evolves into Group Intelligence.

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Even the intelligent investor is likely to need considerable willpower to keep from following the crowd. – Benjamin Graham

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What tactics do you use to remove emotions from your investing decisions? Have you ever been caught following the crowd?

http://etfhq.com/blog/2010/03/16/tra...erd-mentality/

[steveyos]

I'm the only original person left

[xoxo]

Intelligence, Personality, Politics, and Happiness

REVISED 07/08/11

This post is a collection and refinement of related posts at my old blog, Liberty Corner. Each section of this post carries the same title as the original post at Liberty Corner. “IQ and Personality” is and has been, by far, the most popular of my Liberty Corner posts, so I give the eponymous section the place of honor in this post.

Web pages that link to this post usually consist of a discussion thread whose participants’ views of the post vary from “I told you so” to “that doesn’t square with me/my experience” or “MBTI is all wet because…”. Those who take the former position tend to be persons of above-average intelligence whose MBTI types correlate well with high intelligence. Those who take the latter two positions tend to be persons who are defensive about their personality types, which do not correlate well with high intelligence. Such persons should take a deep breath and remember that high intelligence (of the abstract-reasoning-book-learning kind measured by IQ tests) is widely distributed throughout the population. As I say below, ” I am not claiming that a small subset of MBTI types accounts for all high-IQ persons, nor am I claiming that a small subset of MBTI types is populated entirely by high-IQ persons.” All I am saying is that the bits of evidence which I have compiled suggest that high intelligence is more likely — but far from exclusively — to be found among persons with certain MBTI types.

The correlations between intelligence, political leanings, and happiness are admittedly more tenuous. But they are plausible.

Leftists who proclaim themselves to be more intelligent than persons of the right do so, in my observation, as a way of reassuring themselves of the superiority of their views. They have no legitimate basis for claiming that the ranks of highly intelligent persons are dominated by the left. Leftist “intellectuals” in academia, journalism, the “arts,” and other traditional haunts of leftism are prominent because they are vocal. But they comprise a small minority of the population and should not be mistaken for typical leftists, who seem mainly to populate the ranks of the civil service, labor unions, the teaching “profession,” and the unemployed. (It is worth noting that public-school teachers, on the whole, are notoriously dumber than most other college graduates.)

Again, I am talking about general relationships, to which there are many exceptions. If you happen to be an exception, don’t take this post personally. You’re probably an exceptional person.

IQ AND PERSONALITY

A few years ago I came across some statistics about the personality traits of high-IQ persons (those who are in the top 2 percent of the population).* The statistics pertain to a widely used personality test called the Myers-Briggs Type Indicator (MBTI), which I have taken twice. In the MBTI there are four pairs of complementary personality traits, called preferences: Extraverted/Introverted, Sensing/iNtuitive, Thinking/Feeling, and Judging/Perceiving. Thus, there are 16 possible personality types in the MBTI: ESTJ, ENTJ, ESFJ, ESFP, and so on. (For an introduction to MBTI, summaries of types, criticisms of MBTI, and links to other sources, see this article at Wikipedia. A straightforward description of the theory of MBTI and the personality traits can be found here. Detailed descriptions of the 16 types are given here.)

In summary, here is what the statistics indicate about the correlation between personality traits and IQ:

Other personality traits being the same, an iNtuitive person (one who grasps patterns and seeks possibilities) is 25 times more likely to have a high IQ than a Sensing person (one who focuses on sensory details and the here-and-now).

Again, other traits being the same, an Introverted person is 2.6 times more likely to have a high IQ than one who is Extraverted; a Thinking (logic-oriented) person is 4.5 times more likely to have a high IQ than a Feeling (people-oriented) person; and a Judging person (one who seeks closure) is 1.6 times as likely to have a high IQ than a Perceiving person (one who likes to keep his options open).

Moreover, if you encounter an INTJ, there is a 22% probability that his IQ places him in the top 2 percent of the population. (Disclosure: I am an INTJ.) Next are INTP, at 14%; ENTJ, 8%; ENTP, 5%; and INFJ, 5%. (The next highest type is the INFP at 3%.) The five types (INTJ, INTP, ENTJ, ENTP, and INFJ) account for 78% of the high-IQ population but only 15% of the total population.**

Four of the five most-intelligent types are NTs, as one would expect, given the probabilities cited above. Those same probabilities lead to the dominance of INTJs and INTPs, which account for 49% of the Mensa membership but only 5% of the general population.**

Persons with the S preference bring up the rear, when it comes to taking IQ tests.**

A person who encountered this post when it was at Liberty Corner claims that “one would expect to see the whole spectrum of intelligences within each personality type.” Well, one does see just that, but high intelligence is skewed toward the five types listed above. I am not claiming that a small subset of MBTI types accounts for all high-IQ persons, nor am I claiming that a small subset of MBTI types is populated entirely by high-IQ persons.

I acknowledge reservations about MBTI, such as those discussed in the Wikipedia article. An inherent shortcoming of psychological tests (as opposed to intelligence tests) is that they rely on subjective responses (e.g., my favorite color might be black today and blue tomorrow). But I do not accept this criticism:

[S]ome researchers expected that scores would show a bimodal distribution with peaks near the ends of the scales, but found that scores on the individual subscales were actually distributed in a centrally peaked manner similar to a normal distribution. A cut-off exists at the center of the subscale such that a score on one side is classified as one type, and a score on the other side as the opposite type. This fails to support the concept of type: the norm is for people to lie near the middle of the subscale.[6][7][8][33][42]

Why was “it was expected” that scores on a subscale (E/I, S/N, T/F, J/P) would show a bimodal distribution? How often does one encounter a person who is at the extreme end of any subscale? Not often, I wager, except in places where such extremes are likely to be clustered (e.g., Extraverts in acting classes, Introverts in monasteries). The cut-off at the center of each subscale is arbitrary; it simply affords a shorthand characterization of a person’s dominant traits. But anyone who takes an MBTI (or equivalent instrument) is given his scores on each of the subscales, so that he knows the strength (or weakness) of his tendencies.

Regarding other points of criticism: It is possible, of course, that a person who is familiar with MBTI tends to see in others the characteristics of their known MBTI types (i.e., confirmation bias). But has that tendency been confirmed by rigorous testing? Such testing would examine the contrary case, that is, the ability of a person to predict the type of a person whom he knows well (e.g., a co-worker or relative). The supposed vagueness of the descriptions of the 16 types arises from the complexity of human personality; but there are differences among the descriptions, just as there are differences among individuals. If only half of the persons who take the MBTI are able to guess their types before taking it, does that invalidate MBTI or does it point to a more likely phenomenon, namely, that introspection is a personality-related trait, one that is more common among Introverts than Extraverts. A good MBTI instrument cuts through self-deception and self-flattery by asking the same set of questions in many different ways, and in ways that do not make any particular answer seem like the “right” one.

My considerable exposure to high-IQ scientists in 30 years of working with them is suggestive. Most of them seemed to exhibit the traits of INTJs and INTPs. And those who took an MBTI test were found to be INTJs and INTPs.

IQ AND POLITICS

It is hard to find clear, concise analyses of the relationship between IQ and political leanings. I offer the following in evidence that very high-IQ individuals lean strongly toward libertarian positions.

The Triple Nine Society (TNS) limits its membership to persons with IQs in the top 0.1% of the population. In an undated survey (probably conducted in 2000, given the questions about the perceived intelligence of certain presidential candidates), members of TNS gave their views on several topics (in addition to speculating about the candidates’ intelligence): subsidies, taxation, civil regulation, business regulation, health care, regulation of genetic engineering, data privacy, death penalty, and use of military force.

The results speak for themselves. Those members of TNS who took the survey clearly have strong (if not unanimous) libertarian leanings.

THE RIGHT IS SMARTER THAN THE LEFT

I count libertarians as part of the right because libertarians’ anti-statist views are aligned with the views of the traditional (small-government) conservatives who are usually Republicans. Having said that, the results reported in “IQ and Politics” lead me to suspect that the right is smarter than the left, left-wing propaganda to the contrary notwithstanding. There is additional evidence for my view.

A site called Personality Page offers some data about personality type and political affiliation. The sample is not representative of the population as a whole; the average age of respondents is 25, and introverted personalities are overrepresented (as you might expect for a test that is apparently self-administered through a web site). On the other hand, the results are probably unbiased with respect to intelligence because the data about personality type were not collected as part of a study that attempts to relate political views and intelligence, and there is nothing on the site to indicate a left-wing bias. (Psychologists, who tend toward leftism, have a knack for making conservatives look bad, as discussed here, here, and here. If there is a strong association between political views and intelligence, it is found among so-called intellectuals, where the herd mentality reigns supreme.)

The data provided by Personality Page are based on the responses of 1,222 individuals who took a 60-question personality test that determined their MBTI types (see “IQ and Personality”). The test takers were asked to state their political preferences, given these choices: Democrat, Republican, middle of the road, liberal, conservative, libertarian, not political, and other. Political self-labelling is an exercise in subjectivity. Nevertheless, individuals who call themselves Democrats or liberals (the left) are almost certainly distinct, politically, from individuals who call themselves Republicans, conservatives, or libertarians (the right).

Now, to the money question: Given the distribution of personality types on the left and right, which distribution is more likely to produce members of Mensa? The answer: Those who self-identify as persons of the right are 15% more likely to qualify for membership in Mensa than those who self-identify as persons of the left. This result is plausible because it is consistent with the pronounced anti-government tendencies of the very-high-IQ members of the Triple Nine Society (see “IQ and Politics”).

REPUBLICANS (AND LIBERTARIANS) ARE HAPPIER THAN DEMOCRATS

That statement follows from research by the Pew Research Center (“Are We Happy Yet?” February 13, 2006) and Gallup (“Republicans Report Much Better Health Than Others,” November 30, 2007).

Pew reports:

Some 45% of all Republicans report being very happy, compared with just 30% of Democrats and 29% of independents. This finding has also been around a long time; Republicans have been happier than Democrats every year since the General Social Survey began taking its measurements in 1972….

Of course, there’s a more obvious explanation for the Republicans’ happiness edge. Republicans tend to have more money than Democrats, and — as we’ve already discovered — people who have more money tend to be happier.

But even this explanation only goes so far. If one controls for household income, Republicans still hold a significant edge: that is, poor Republicans are happier than poor Democrats; middle-income Republicans are happier than middle-income Democrats, and rich Republicans are happier than rich Democrats.

Gallup adds this:

Republicans are significantly more likely to report excellent mental health than are independents or Democrats among those making less than $50,000 a year, and among those making at least $50,000 a year. Republicans are also more likely than independents and Democrats to report excellent mental health within all four categories of educational attainment.

There is a lot more in both sources. Read them for yourself.

Why would Republicans be happier than Democrats? Here’s my thought, Republicans tend to be conservative or libertarian (at least with respect to minimizing government’s role in economic affairs). I refer you to a post in which I discussed Thomas Sowell’s A Conflict of Visions:

He posits two opposing visions: the unconstrained vision (I would call it the idealistic vision) and the constrained vision (which I would call the realistic vision). As Sowell explains, at the end of chapter 2:

The dichotomy between constrained and unconstrained visions is based on whether or not inherent limitations of man are among the key elements included in each vision…. These different ways of conceiving man and the world lead not merely to different conclusions but to sharply divergent, often diametrically opposed, conclusions on issues ranging from justice to war.

Idealists (“liberals”) are bound to be less happy than realists (conservatives and libertarians) because idealists’ expectations about human accomplishments (aided by government) are higher than those of realists, and so idealists are doomed to disappointment.

All of this is consistent with findings reported by law professor James Lindgren:

[C]ompared to anti-redistributionists, strong redistributionists have about two to three times higher odds of reporting that in the prior seven days they were angry, mad at someone, outraged, sad, lonely, and had trouble shaking the blues. Similarly, anti-redistributionists had about two to four times higher odds of reporting being happy or at ease. Not only do redistributionists report more anger, but they report that their anger lasts longer. When asked about the last time they were angry, strong redistributionists were more than twice as likely as strong opponents of leveling to admit that they responded to their anger by plotting revenge. Last, both redistributionists and anti-capitalists expressed lower overall happiness, less happy marriages, and lower satisfaction with their financial situations and with their jobs or housework. (From the abstract of Northwestern Law and Economics Research Paper 06-29, “What Drives Views on Government Redistribution and Anti-Capitalism: Envy or a Desire for Social Dominance?,” March 15, 2011.)

THE BOTTOM LINE

If you are very intelligent — with an IQ that puts you in the top 2% of the population — you are most likely to be an INTJ, INTP, ENTJ, ENTP, or INFJ, in that order. Your politics will lean heavily toward libertarianism or small-government conservatism. You probably vote Republican most of the time because, even if you are not a card-carrying Republican, you are a staunch anti-Democrat. And you are a happy person because your expectations are not constantly defeated by reality.

* * *

Related post: Intelligence as a Dirty Word

* * *

Footnotes:

* I apologize for not having documented the source of the statistics that I cite here. I dimly recall finding them on or via the website of American Mensa, but I am not certain of that. And I can no longer find the source by searching the web. I did transcribe the statistics to a spreadsheet, which I still have. So, the numbers are real, even if their source is now lost to me.

** Estimates of the distribution of MBTI types in the U.S. population are given in two tables on page 4 of “Estimated Frequencies of the Types in the United States Population,” published by the Center for Applications of Psychological Type. One table gives estimates of the distribution of the population by preference (E, I, N, S, etc.). The other table give estimates of the distribution of the population among all 16 MBTI types. The statistics for members of Mensa were broken down by preferences, not by types; therefore I had to use the values for preferences to estimate the frequencies of the 16 types among members of Mensa. For consistency, I used the distribution of the preferences among the U.S. population to estimate the frequencies of the 16 types among the population, rather than use the frequencies provided for each type. For example, the fraction of the population that is INTJ comes to 0.029 (2.9%) when the values for I (0.507), N (0.267), T (0.402), and J (0.541) are multiplied. But the detailed table has INTJs as 2.1% of the population. In sum, there are discrepancies between the computed and given values of the 16 types in the population. The most striking discrepancy is for the INFJ type. When estimated from the frequencies of the four preferences, INFJs are 4.4% of the population; the table of values for all 16 types gives the percentage of INFJs as 1.5%.

Using the distribution given for the 16 types leads to somewhat different results:

There is a 31% probability that an INTJ’s his IQ places him in the top 2 percent of the population. Next are INFJ, at 14%; ENTJ, 13%; and INTP, 10%. (The next highest type is the ENTP at 4%.) The four types (INTJ, INFJ, ENTJ, AND INTP) account for 72% of the high-IQ population but only 9% of the total population. The top five types (including ENTPs) account for 78% of the high-IQ population but only 12% of the total population.

Four of the five most-intelligent types are NTs, as one would expect, given the probabilities cited earlier. But, in terms of the likelihood of having an IQ, this method moves INFJs into second place, a percentage point ahead of ENTJs.

In any event, the same five types dominate, and all five types have a preference for iNtuitive thinking.

As before, persons with the S preference generally lag their peers when it comes to IQ tests.

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http://politicsandprosperity.wordpre...and-happiness/

[xoxo]

I'm INTJ

Go fuck yourselves retard sheeple

[steveyos]

I read all of that and everyone else will too, spattthhhhh, just koddin buddy no one gives a fuck

lol, 3 months of psychology ^

keep deluding yourself with your superiority complex
the fact remains you're socially retarded and can't hold down a job and have failed in everything you've tried

have fun analysing your failure with your perceived higher IQ and personality type

[xoxo]

it would be well above your head in any event

[xoxo]

you did 3 months of psychology?

idiot

basically if you aren't an INTJ you are sucking dick

[xoxo]

I'm INTJ

and you are sucking dick

this is all great

but the fact remains that you're stuck in a bogan life style living like white trash
you're either one step above steffies or at his level

i did want to hear about your encounter next door, but you refuse to tell anyone
did you kidnap that woman's dog after breaking in, or what?

[juji]

Lisa shows Reversal Psychology AKA Anti-Psychology, Super Retardation Mental, Total Irony of Intelligence

[xoxo]

this is all great

but the fact remains that you're stuck in a bogan life style living like white trash
you're either one step above steffies or at his level

i did want to hear about your encounter next door, but you refuse to tell anyone
did you kidnap that woman's dog after breaking in, or what?

Go read the thread moron

it's my job to repeat things to you because you're too fucking stupid to be able to read

I'm not teaching right now and you're not some blameless struggling snot-face who's parents don't even have a book in the house

you don;t even have an excuse to be as god damn pathetic and stupid as you are and are 100% to blame for your own idiotic rubbish

Lisa shows Reversal Psychology AKA Anti-Psychology, Super Retardation Mental, Total Irony of Intelligence

should to

[xoxo]

Lisa shows Reversal Psychology AKA Anti-Psychology, Super Retardation Mental, Total Irony of Intelligence

That is not what anti-psychology means juji fruity

go look it up and learn because it's actually a great subject and is also relevent to this topic

Go read the thread moron

it's my job to repeat things to you because you're too fucking stupid to be able to read

I'm not teaching right now and you're not some blameless struggling snot-face who's parents don't even have a book in the house

you don;t even have an excuse to be as god damn pathetic and stupid as you are and are 100% to blame for your own idiotic rubbish

i just enjoy watching you flail about trying to impress everyone with how smart you are
i love it when you reveal heaps of personal information showing everyone that you're a failure as well

now that that's out of the way and i've prodded you YET AGAIN into rage posting, please take a breath and tell me what happened with the neighbour

[xoxo]

*yawn*

http://rubycalaber.com/forums/showth...s-gone-missing

you DID NOT break in? what a let down

[juji]

That is not what anti-psychology means juji fruity

go look it up and learn because it's actually a great subject and is also relevent to this topic

http://en.wikipedia.org/wiki/Antipsychology

have fun

[xoxo]

yes I did

dipshit

obviously i didn't read your thread, that's why i'm asking you

why're you so angry? calm down.

[sex with dead people]

lol, 3 months of psychology ^

keep deluding yourself with your superiority complex
the fact remains you're socially retarded and can't hold down a job and have failed in everything you've tried

have fun analysing your failure with your perceived higher IQ and personality type

http://en.wikipedia.org/wiki/Antipsychology

have fun

here you go elezzzark

have fun

http://translate.google.com/translat...Antipsychology

[xoxo]

how obtuse

*yawn*

[juji]

m0nde you're trolling a wrong person

[xoxo]

http://en.wikipedia.org/wiki/Antipsychology

have fun

I'm pretty familiar with the subject

have you read about it?

[xoxo]

no wait that is a rubbish link juji


read this one instead
http://en.wikipedia.org/wiki/Anti-psychiatry

[juji]

I'm pretty familiar with the subject

have you read about it?

I'm INTJ and you are sucking dick

http://es.wikipedia.org/wiki/Anticristo

[xoxo]

I'm INTJ and you are sucking dick

lol

read the link I provided you

your one had two refrences of dubious sources

This is an outline of the subject

http://en.wikipedia.org/wiki/Anti-psychiatry