The Sheeple - Navigating Social Meadows of Investment

Introduction

There are two kinds of people on this Earth: those who were born to be leaders, and those who were born to be followers.

Ha ha 🙂  Such juvenile thinking is of course only to break the ice here for this post.  Seriously though, in the same vein as those who retreat behind "us vs. them" or "people are either black and white" embrace the lowest possible bar of labeling the world, lets look at another comedic and broken false-dichotomy:  the alpha and the beta male.

Huzzah, lets keep our eyes closed and attach labels to the world!  This time the labels come from a largely discredited theory of canid social behavior.  But you get the idea, it doesn't really matter.  Just state the label, loudly, and close your eyes and ears tightly to avoid any contamination by the cesspool of observation.  The world is your enemy!

Haha, I crack myself up sometimes.

HOWEVER if the first trap here is the false dichotomy, the second trap could very well be that of being too frightened by the first trap to look carefully at anything salvageable.  For although a division into two (or more, or even a continuum of) groups based on some statistical propensity (to lead or to follow) is not a generally instructive cataloging, we should not yet discard the notion that the urge to follow (or to lead) could be an important consideration or at least a data point which could add something to our model of the world around us.

So lets try another slightly more advanced dichotomy: There are two kinds of people in the world.  The sheeple and the people: Those who let their lives be ruled by social pressure (such as the desire to lead or to follow) and those who take imperatives from personal desires and seek to achieve goals unrelated to a social concern.

While this is another false dichotomy, the bar has been raised quite a bit.  Keep in mind here that the "sheeple" includes those who "just want to be in charge" as much as those who "just want to follow".  Both are strategies related with elevating the concerns of others above one's own concerns.  Whether we seek to fulfill or to circumvent the concerns of others, while our efforts are going towards or against their concerns specifically and therefor not towards independent concerns of our own, we are sheeple.

Lets consider some examples of possible sheepleisms:

"I hope I'm not underdressed"

"I just want to be famous"

"Everyone watches that"

"I just want to be commander of an army"

"Which way do they want us to go here?"

"That's not what wikipedia says!"

"Sure, I'll do it if you have a camera"

"All the big guys were buying bitcoins, I better buy some too"

"I want to make others suffer, because somebody did that to me when I was a kid"

Yup, all sheepleisms.

Sure, we are all social animals, and social pressures make themselves felt in a variety of ways.  There's nothing inherently wrong with at some juncture or other being a sheeple.  They say that when in Rome one should do what the Romans do.  OK, the reference to the orcish empire is distasteful to me but there is yet some truth to it - in a social world one must pay attention to the thoughts of others.  In fact social capital is perhaps the most valuable of all forms of capital.  Therefore we don't seek to "not be sheeple" but to understand the forces of ovine motion.

My point with this introduction is just to get you thinking a bit about the social pressures that have given rise to the term "sheeple" so that we can apply the concept to investments and academia, and a wide variety of other consensus dependent mechanisms.

Let's get started.

Investment

A discipline such as rock climbing is one in which an individual can set a goal and achieve it.  While dangers of meeting folks on the route, and considerations of taking pictures at the summit might exist, one can face problems encountered en route directly and either solve, or not solve them.  Whether a hold works to get your body up a section of rock face does not depend on what some other people might do or label you or really on any social concern.  The same might be said about determining the volume of a truncated pyramid, producing a working program, playing a Bach partita, or countless other endeavors.

Investment on the other hand is something for which one must intrinsically follow the school, the gaggle, the murder, or the flock.  The sheep define what a successful investment is:  it is one which all the sheep have flocked to.  It could be that company B has a product that really is vastly superior, however if you went all in, and the sheeple all supported company A - you have lost the round of investment (we've explored this theme once before here).  You've been left alone outside the safety of the flock.  Perhaps eventually the sheep will shift toward the greener field, however a wise man once said that the market can remain irrational longer than you can remain solvent.

In all likelihood you have made this image in your head before, and perhaps included wolves in the scenario.  Sometimes it is tempting to imagine certain investors, houses, brokers, loan "sharks", or something, as wolves.  However for the purposes of our considerations here, they are not immune from the forces of the flock.  Those folks have investments too, and that makes them sheep.  The wolves in our analogy will be the existential forces which cause loss.  Sure the losses might have gone to other sheep, this is understood.

The center of the flock is hard to get to.  Everyone wants to be there, so it's very expensive and crowded.  It's the center flock bubble.  Everyone watches this area, looking for any sudden movements.  Why?  Because one wants to stay with the bubble, wherever it goes.

"Don't question the grass, watch the other sheep".
"Don't watch the road, watch the lights on the car in front of you"

Suppose now you have some indication that the grass is in fact greener to the west.  Where should you stand?  Well you'll nibble your way slightly in that direction out of the bubble, towards the edge of the flock.  Perhaps it's a calm day with good visibility and you see other sheeple picking up little bits of this westwardly investment.  So you'll keep a sharp eye on your path back toward the center, and depending on how courageous you are you'll extend a little further.

Suddenly one of the wealthy sheeple near the center of the flock senses danger from NW and the center pushes opposite that direction a bit.  The move scares a large fraction of the sheeple near you who compensate moving east.  What do you do?

Fortunately you made it back to safety.  A lot of leveraged sheeple who couldn't get back in time were hung out to dry.  Note that it doesn't matter one whit that the grass really was greener to the west.  What matters is the movement of the other sheep.  Don't forget it!

If you want to know where the sheep are, you try to follow the indexes.  Indexing the center of a large flock with some accuracy or utility is a lot easier than doing so for a small flock or smaller trend.  This is because the indexes are usually not to be trusted, being created for some purpose or another, but enough mass of bodies becomes hard to hide.

Academia

Academia is another kind of flock of sheeple.  You might want to blame this opinion on some defect of my own experience with an ivy league institution, postdoctoral work, and some teaching.  Perhaps so, but consider the metaphor anyway please.

If you have some great academic idea, pursue it, expand and grow it - however unless it is accepted by at least some subset of the flock of academics it is not considered part of academia.  It is crackpottery and academic failure.  If one sees a region of "greener grass" in a given subject, the prudent path is to nudge the other sheep to take a look in that direction, gaining enough adherents that you can remain safely ensconced in a flock.  Packing one's bags and setting off is a dangerous step, just like it was on the investment side.  Of course, if the journey doesn't require straying far from the existing walls of the Royal Baa-cademy, then by all means - go.  It is when the journey requires upsetting some other sheep that the difficulty begins.

Similar to the center-flock bubble in investments, there is center-flock bubble in academia.  Papers which push the center are sure-in candidates for the "high impact" journals.  And we can also be sure that the "high impact" journals will not publish papers which might have a high impact, that is, which promote a shift of the center.  Instead, we can be sure that there is a very strong social pressure that any research conclude toward the direction of motion currently underway by the academic center.  Got an interesting measurement?  Better compare it to the right literature and adjust it a bit.  Got an interesting epidemiological survey?  Better compare it to the interests of the sheeps in shepherds clothes, and to those sheepish forces that would guide academia and control your position therein.

A shift of the center is known as a "paradigm shift" and these very concerns I bla-blaa-baa about here were addressed in much higher style by many others over the years, including Thomas Kuhn in his "Structures of Scientific Revolution".  The conclusion is often that moving a flock of sheep - even in the face of dead obvious improvements, will take a long time.

When a paradigm shift is upon us, one waits for those sheep which have most strongly staked the center position to die off.  And even after they have died off, often there is a residual force which pulls people towards the previous center.  Notice how we still use roman numerals on occasion, or consider monetized gold, biblical evangelism, or the pledge of allegiance.  These things are not just caused by sheeple who "just want to follow" but also by sheeple who "just want to lead".  Both are forces that contribute to the ovine inertia.

Tune in next week for a Generalized Lagrangian Theory of Ovine Motion.

 

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