Gustave Le Bon & Justin Mamis - A Reprise

WALL STREET SMARTS, THE BLOG, IS NOW WALL STREET SMARTS, THE BOOK.  FULLY EDITED AND REVISED WITH NEW MATERIAL ON AMAZON

There is a common thread running through Dr. Le Bon's discussion of crowds and Mr. Mamis' treatment of an individual's wrestling with risk.  Dr. Le Bon reveals the "psychological" crowd, moving almost as one person who has been hypnotized.  Mr. Mamis reveals that a crowd of subconscious parental lessons and emotions from childhood can impact an person's decisions and actions for a life time.

Dr. Le Bon believes that a person in a crowd (either real or psychological) loses his or her sense of individual responsibility and becomes very susceptible to the contagion of the idea or image embraced by the crowd.  In effect, the person becomes subject to a level of suggestibility which draws him or her into the crowd.  Once subject to the force of the crowd, the person becomes impetuous and takes up the crowd's vision with abandon.

Mr. Mamis says that each person has an inner voice warning him or her of the risks in life and suggesting that they be avoided.  Careful thought and preparation for every risk in life is the inner parental answer.  Unfortunately, neither life nor the market will always give a person sufficient time to fully ponder the choices nor all of the information needed to make the best choice.  As Mr. Mamis explained about the market, Because it is a process, there is no one moment or single point, at which one can make an obvious "sure" decision.

So, what is the lesson to be learned from these two authors?  It would seem that the individual investor making what is intended to be a long term investment must be able to recognize not only the external crowd (market) influences trying to take over his or her thought process, but also those inner voices and emotions demanding a moment-to-moment choice be made on that long term decision.

If you, the investor, can keep in mind the image of the grain of sand being moved about on a beach by wind or waves as depicted by both Dr. Le Bon and Mr. Mamis, you may be able to reduce the external as well as the internal pressures you may experience in the hurly burly of the market.  Those pressures, to a certain extent, depend on how you approach the market and investment decisions.  We will begin to explore that approach to the market in the next post.

You can leave a comment without going through the process of signing in.  Click the comments link, add your comment and pick the "Anonymous" profile.  Add your name if you wish.  Your comment will be posted within 24 hours of receipt.

Excerpt from The Nature of Risk, Stock Market Survival and the Meaning of Life by Justin Mamis, copyright 1991, is used with permission of Mr. Mamis and Fraser Publishing Company.