Mobs, Messiahs, and Markets

Steering Clear of the Mob

So, what should you do to make money?

It immediately occurs to us that we are not asking the right question. The proper question is: What should you not do?

In war, politics, and every other form of the public spectacle, the critical protection comes in the form of a prohibition, not a command. Because it is the commission you have to worry about, not so much the omissions. Action, not inaction, is what normally ruins you.

Thou shalt not kill—if only Mao or Che or George W. had bothered to listen. Thou shalt not bear false witness—if only witch hunters, child social workers, and dot‐com analysts would think of that! Thou shalt not covet thy neighbor's wife, nor his ass. Think of all the embarrassment that could be avoided if people remembered that one.

Well, there are interdictions in investing, too, that can help you avoid being swept along by the manias of the market.

If an investor merely recognizes the way mob sentiment works, he is far ahead of most punters. Most people put their faith in experts and their money in mutual funds, and they get their opinions from the headlines. But if he can tune out the noise of the public spectacle altogether, an investor has a chance of at least keeping his dignity … and maybe even his money.