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“Don’t be a sheep !”

“Don’t be a sheep !”

Silently nod our heads, acquiesce, become meek and accepting. Sure it feels safe, comfortable, yet we know it is wrong at some level but... we just ... go with the flow. This is called herd behaviour and it is programmed into us at some base level. It probably hails back to the African Serengeti when your great (x 80) Granddad was running for his life from some marauding beast intent on making him his dinner.

“Don’t be a sheep,” is often said in order to get people to think for themselves, be independent and “don’t follow the crowd.”

Sheep are not noted for their independence of thought. They follow each other and remain part of the flock. Sheep get sheared and end up as lamb chops.

Sheep-like behaviour is a good example of group or herd behaviour. This is how groups of people and sometimes entire nations can often reach consensus and act in unison and this can lead to ‘herd behaviour’.

Humans have an extraordinary ability of surrendering their individual beliefs in group settings. We frequently abandon our rational thought. We often will ‘follow the leader’ en masse rather than ask hard questions and question the consensus or authority.

If the group are incorrect in its belief or course of action, it is less likely that the mistake will be identified and corrected.

This is frequently seen with regard to money. Throughout history, from the Tulip Bubble in 1637, to the Dot-com crash in 1999 and recent property bubbles, investors have frequently been too eager to buy when they should be careful and have been fearful when they should be buying.

When the herd is ‘flocking’ or ‘piling’ into an asset and it is the talk at dinner parties and throughout society, it is time to be cautious. When the herd frowns upon, is nervous or fearful about an investment, it generally means it is a good opportunity.

When there is too much greed - generally everybody has bought and prices have risen to successive record highs. When there is too much fear - generally everybody has sold and prices have fallen in value creating opportunity.

The problem is that in our interconnected world economy there are vested interests that go out of their way to manufacture demand. If we have learnt anything over the past two decades is that there are no infallible masters of the universe when it comes to economics, no experts that know everything. Central bankers can be and frequently are bonkers.

Bankers can and do lend recklessly, many auditors cannot audit and consumers can and do behave irrationally. And politicians, well don't get me started!

Those who have protected their wealth throughout history are ones who think for themselves and are independent of thought. They have the foresight to go against the HERD.


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