A State of Unwholesome Fermentation: On William J. Bernstein’s “The Delusions of Crowds”

December 5, 2021   •   By Tom Zoellner

The Delusions of Crowds: Why People Go Mad in Groups

William J. Bernstein

A WOMAN IN Waco, Texas, who bought into the QAnon myth used her car to repeatedly ram another vehicle because she believed the driver “was a pedophile and had kidnapped a girl for human trafficking.” Executives of Swissair thought their company deserved its nickname, “the flying bank,” and adopted a strategy from the ultra-confident McKinsey & Company to gobble up smaller airlines instead of making alliances; they went bankrupt within a decade. The Burbank Unified School District banned To Kill a Mockingbird from classrooms because defense attorney Atticus Finch was a “white savior” and reading it might cause “harm.” Hyped-up supporters of former President Donald Trump beat police officers with flagpoles and called for the vice president’s hanging out of a collective fantasy that the 2020 election had been “stolen.”

The power of groupthink to lead otherwise cautious people into irrational movements has been known since long before dozens of people danced themselves to death in the streets of Strasbourg in 1518. In his authoritative The Delusions of Crowds: Why People Go Mad in Groups, the economic historian William J. Bernstein goes into frightening detail on some of the most flagrant groupthink episodes, in which humans set aside critical reasoning to form an affiliate cluster, making bad decisions in sync. “Novelists and historians have known for centuries that people do not deploy the powerful human intellect to dispassionately analyze the world,” he writes, “but rather to rationalize how the facts conform to their emotionally derived preconceptions.” That cognitive bug, it turns out, is far more pronounced in group settings.

The Delusion of Crowds complicates the argument presented in The Wisdom of Crowds. Bernstein isn’t against all group hypotheses. As it turns out, an amalgam of multiple decisions can be quite accurate. He cites a famous experiment in which schoolchildren are asked to write secret guesses as to how many beans are in a jar; a mathematical average of the numbers yielded an almost perfect answer. But when the schoolchildren were asked to discuss their guesses and produce a composite result, the guess was way off. As anyone who has served on an academic committee can tell you, strong personalities, peer pressure, and fear of looking stupid often produce outcomes that are far more radical or extreme than any individual would choose in isolation.

Bernstein’s antihero is Charles Mackay, the prescient author of the 1841 study Memoirs of Extraordinary Popular Delusions, in which he surveyed the long history of follies believed by the multitudes, most particularly, the notorious run-up on tulip bulbs in the Netherlands. “It seems, though, that Mackay, whose name is today nearly synonymous with the word ‘mania,’ almost completely missed the massive one he lived through,” writes Bernstein. Mackay was the editor of the Glasgow Argus and covered the initial enthusiasm for railway projects in a hustling register that looked, in hindsight, exactly like an example of the collective euphoria that he spent so much time trying to understand and translate.

In addition to penning several books on smart investing, Bernstein is a trained neurologist who convincingly explains the two chief cognitive systems at work — sometimes at war — within the mind. He calls this dyad System 1 and System 2:

Over the course of the twentieth century, neuroscientists discovered that there are two different types of human thought processes: fast-moving emotional responses located in our deeply placed and evolutionarily ancient limbic system, our so-called “reptilian brain,” and much slower conscious reasoning that arises from the evolutionarily newer cortex that overlies the limbic system.

This stacked physiology makes rationality “a fragile lid perilously balanced on the bubbling cauldron” of the limbic system which responds far better to concepts and simplistic good-versus-evil narratives than it does to abstractions of data and frustratingly complex answers. “When compelling narrative and objective fact collide, the former often survives, an outcome that has cursed mankind since time immemorial.”

Whether through cupidity or by accident, two groups of influencers have come to manipulate this vulnerability in the mind’s armor: religious charlatans, especially of the end-times variety, and financial scammers. These twin villains of Bernstein’s book play alternating roles in his chapters as he unpacks some of the more dismal group delusions of the last 500 years. Bernstein renders these episodes in fresh and impressive ways; he has a gift for mining the archives to tell familiar stories with unexpected details. The result is the reader’s serendipitous education on how the sayings of Muhammed were vetted for accuracy; the culture of Enron’s accounting department; the oddball first careers of Christian eschatologists; the science behind fMRI readouts; Hesiod’s poetry; the splash made by the film Jaws; the horrors of the local theocracies that popped up in northern Europe after Martin Luther; the 1979 siege of the mosque at Mecca. Bernstein’s command of detail is capacious; his ability to weave the facts into a limpid narrative is equally surehanded.

The hand of government occasionally stirs the craziness into clouds of unhealthy steam. When the modern state of Israel was created in 1948, a generation of evangelists rushed to the Book of Revelation to line up vaguely worded first-century verses to Associated Press dispatches from Jerusalem. When the British Crown moved to consolidate its national debt by forming a company to transport kidnapped slaves to the South Pacific, stock jobbers made a killing on the greed of ordinary citizens grabbing for shares. Mackay himself wrote of this episode: “The public mind was in a state of unwholesome fermentation. Men were no longer satisfied with the slow but sure profits of cautious industry. The hope of boundless wealth for the morrow made them heedless and extravagant for today.” His words could have stood in for the Sunbelt mortgage frenzy of 2007, the NASDAQ explosion of the late 1990s, or any number of recent American speculative bonanzas that left their most aggressive investors in ruins.

The heroes of this book are the scientists whom Bernstein quotes and channels, and especially the evolutionary psychologists who posit “the Manichean mindset likely evolved from the need for tribal cohesiveness in early hunter-gatherer societies.” Here was the cauldron, Bernstein suggests, in which the real-world data that ought to be at the pinnacle of knowledge is instead put to work mainly to justify the irrational conclusions of the limbic story machine: the “press secretary” for the id, as one scientist puts it. Or as economists like to put it, “If you torture the data long enough, it will eventually confess.”

The success of the project depends on the degree to which Bernstein has convinced the reader that the pecuniary dreams of investors essentially stem from the same psychological place as those religious believers who are inclined to disbelieve prophetic admonitions, not — as Christ put it, in one tradition — to waste time calculating “the day or the hour” of the final global curtain. Bernstein asks dryly at one point: “Given the zero accuracy of end-times predictions, just why are we so swayed by these compelling narratives?” One wishes for a stronger bridge between the eschatological and the financial arguments, and there are points at which the highlighting of some of the worst episodes of religious delusions seem put forward in a way to discount spiritual motives altogether, in the manner of the fallacies of composition practiced by New Atheists. Round up history’s nutjobs, in other words, and elect them the representatives of the whole.

A central irony of this otherwise excellent book, therefore, is that such a key point is elided with a narrative from an author who cautions us repeatedly about the dangers of intuitive conclusions. As he puts it: “[P]eople greatly prefer stories to data and facts; when faced with such a daunting task, humans default into narrative mode, and perhaps the most pleasing story of all is one that involves the effortless wealth to be had from buying into a new technology.”

That, or a seductive form of politics that promises a return to the glorious earth evoked by Hesiod. Bernstein’s lucid and entertaining history is a warning that the primitive mind lurks under the sheen of alleged rationality, and that a departure into the comforting certainties of groupthink is closer than we may realize. As he says near the conclusion: “[O]ne should never underestimate the human tendency toward mimicry, and especially of how the everyday beneficial mass delusions that help businesses and whole societies function smoothly can rapidly mutate into fraudulent or genocidal mass delusions.”

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Tom Zoellner is LARB’s politics editor and the author of The National Road: Dispatches from a Changing America.