Who will be the Victim of Propaganda: The Conformist or the Critical Thinker?

I have been accused of relying on a website that allegedly peddles "propaganda". 

First, what is propaganda? Based on Dictionary.com’s definition, propaganda has been about “information, ideas, or rumors deliberately spread widely to help or harm a person, group, movement, institution, nation, etc.” 

In short, propaganda essentially is deliberate disinformation or bluntly a lie. So I am, in effect, a believer of lies.

Yet the consensus thinking has revolved around the following themes:

-Debts are free lunches or have no limits or consequences to an individual or to a business entity, to the markets or to the government or to the political economy. 

-Stocks markets are a one way street

The money question is: are these about reality?

Isn’t economics about the law of scarcity?

So which is propaganda? Information that defies economic logic and reality or information designed to sell to the public what they want to hear—confirmation bias?

Let me further spell the difference between a conformist and an independent thinker

A conformist relies on information that conforms with one’s biases. Such person thinks along with the crowd. They are likely to reject information that goes to the contrary regardless of the validity of the reasoning. Crowd information or wisdom is like gospel truth for them.

On the other hand, a critical thinker attempts to distinguish between reality and quackery. Such person, who thinks out-of-the-box, is likely interested with the validity of reasoning or theories rather than finding comfort with the crowd.

So who will likely be a victim of propaganda, the critical thinker or the conformist?

Quote of the Day: The Necessary is Not to be Confused with the Causal

A drivers license is something binary: Pass/Fail. Nobody is foolish enough to try to get high scores in it to improve his CV with a "drivers license from the prestigious center X, summa cum laude". We understand the nonlinearity there; and we get the point that failing the test makes one a bad driver on the road, but better grades at the test won't necessarily make one a better driver. It is an entirely via negativa statement; failing (the negative) is where the information resides, where school knowledge may map to reality. The necessary is not to be confused with the causal.

Now try to translate the idea into other areas of education. The statement "failing to get a degree is bad for you" does not necessarily mean that "better grades are good". It may even mean that higher grades might indicate a sick mind. This is the difference between SATISFICING and OPTIMIZING. An ecologically calibrated person, aware of the fuzziness of the mapping betwen education and skills, should be able to aim for just pass, and not be penalized by the nerd wasting time on fitting his brain cells to the exam at the expense of other skills and activities, such as street fights, reading Montaigne, or meditating under a tree. Given that university knowledge does not map to true knowledge, to protect people from themselves, university degrees should never be anything but binary, without the fluff "honors, shmonors", etc.

This is from Nassim Nicolas Taleb on Facebook expanding his thoughts from Book IV of his latest book, ANTIFRAGILE.

Satisficing and optimizing has been likewise a dilemma to most participants in the financial markets where the mainstream mostly adheres to conventional tools and methodology to satisfy accepted social norms rather than investigating unorthodox perspectives to attain the optimal.

In short, crowd thinking versus critical thinking.

Education: The Difference Between Learning How to Think and What to Think

Professor of Law Butler Shaffer at the LewRockwell.com in the following excerpt, eloquently distinguishes between independent and conformist thinking [bold mine]

Education is an ongoing confrontation between those who want to help children learn how to think, and those who want to teach them what to think. While there are numerous variations on these themes, the contrast can most clearly be found in the distinctions between child-centered Montessori systems, and teacher- and test-centered schools. Government schools usually fall into the latter category. Homeschooling, religious schools, un-schooling, and other forms tend to emphasize either the "how" or the "what" in their efforts with children.

Those who focus on learning how to think have in mind helping children develop their own methods of questioning and analyzing the world around them; to control their own inquiries and opinions; to the end of helping children become independent, self-directed persons. The role of the teacher in such a setting is to provide new learning situations (e.g., open up new subjects of inquiry when the student is ready to do so) and to facilitate the processes of questioning so as to help the students get to deeper levels of understanding.

People who have developed the capacity for epistemological independence are not easy to control for purposes that do not serve their interests. Institutions – which have purposes of their own that transcend those of individuals – require a mass-minded population that has been conditioned to accept outer-imposed definitions of "reality." Any deviation from this systemic purpose – as would derive from students questioning how the arrangement would benefit them – would be fatal to all forms of institutionalism.

The established order has, from one culture and time period to another, insisted on educational systems that train young minds into what to think. "Truth" becomes a set of beliefs that conform to an institutional imperative, and it becomes the purpose of schools to inculcate such a mindset. Whereas "how to think" learning that finds its purpose and focus within the minds of self-directed, independent students, "what to think" education derives from outside the students’ experiences and analytical skills. As Ivan Illich so perceptively expressed it, "[s]chool is the advertising agency which makes you believe that you need the society as it is."

To this end, the established order has helped generate – with eager assistance from academia – a belief that all understanding is a quality requiring phalanxes of self-styled "experts" who, by virtue of their prescribed status, enjoy monopolies to offer opinions about their respective fields of study. Plato’s designation of "philosopher kings" has been sub-franchised into categories of "experts" to be found in "history," "physics," "psychology," "economics," "law," and seemingly endless sub-groupings that negate the role once respected for those who had received a "liberal arts" education.

Read the rest here.

Quotation of the Day: Fickle Public Opinion

In a sense, public opinion is like one of those mountain snow accumulations…. As snow builds up, the likelihood that the whole drift will come crashing down the mountain steadily increases. Finally, as the ultimate snowflake falls on top of the drift, the weight is now too much too be borne, and the whole drift comes down. Major changes in public opinion tend to take the same form. A very large number of books, articles, and lectures which appear to have no great effect nevertheless prepare the way. Eventually a critical mass is reached and what appears to be an overnight change of opinion occurs.

That’s from Gordon Tullock’s “Foreword” to J. Ronnie Davis’s 1971 book The New Economics and the Old Economists (source: Don Boudreaux at Café Hayek)

Public opinion is fundamentally driven by mawkishness and unctuousness.

Public opinion, today, can be characterized by several dominant cognitive biases; particularly, the comfort of the crowd, appeal to tradition, appeal to majority, appeal to experts and appeal to the emotion.

There hardly have been any critical thinking involved in what have been deemed as ‘cerebral’ discussions among conventional experts. Debates mostly revolve around the acceptance of current circumstances, conditions and methodology, where variances of ideas mostly deal with interpretation of events and or on personality issues and or semantical dimensions (mostly bordering on the abstract).

This means that public opinion has been largely influenced by the way elites or how the intellectual class think and project on the issues.

Yet questioning on the validity and the biases of the sources of information, the socio-economic political theories and or the philosophical underpinnings of the current institutional framework would be considered as heresy that risks ostracism for the expositor. Thus, conformity and social acceptance are prioritized at the expense of reality which drives the popular mindset.

And that’s why politics has mainly been centered on the manipulation of public opinion.

Nevertheless, times have been changing.

Real time connectivity has been encouraging on more critical thinking. A diffusion of critical thinking could influence a shift in public opinion through a change in the direction of the way the intellectual group thinks.

Structural changes are happening at the margins. So will public opinion.

State Propaganda, Post Hoc Fallacies and Critical Thinking

The North Korean government says that nature has been sympathizing with the recent loss of their leader.

The Reuters reports,

The passing of North Korean strongman Kim Jong-il has been marked by plunging temperatures, mourning bears and now, according to North Korean state media, by flocks of magpies.

Kim, who died in December aged 69 years after 17 years running the world's most reclusive state, was reputed to be able to control the weather, as well as to have scored a miraculous 38 under par round of golf.

"At around 17:30 on December 19, 2011, hundreds of magpies appeared from nowhere and hovered over a statue of President Kim Il Sung on Changdok School campus in Mangyongdae District, clattering as if they were telling him the sad news," state news agency KCNA reported on Monday.

To an outsider this would be read as absurd, because it is.

But unknown to most, such medium of political communication represents the dominant or mainstream way of how social issues are dealt or tackled with by the political order and by the political establishment influenced media—whether in the US, the Philippines or anywhere around the world.

Most of media’s treatment revolves around the same fallacy: Post hoc ergo propter hoc or “after this, therefore because of this"

Whether social issues as anthropomorphic global warming, trade imbalances, the ‘necessity’ of government spending, militant foreign policy, retributionist healthcare and education and others, hardly anyone seem to care about the research or analytical methodologies used for arriving at implied conclusions.

These social events are considered as given or as ‘facts’ which are mostly backed by references of politicians and or their academic and or institutional factotums (where the latter’s arguments have been premised on math ‘models’).

That’s the difference between the blatant propaganda by the North Korean media and the subtle propaganda masqueraded as well thought public issues in mainstream politics and media.

And the ensuing public debate would mostly center on these assumed ‘facts’ which only magnifies the influence of state propaganda to the public—mostly through the power of suggestion, which again are predicated on the veracity of these assumptions.

As Lenin once said,

A lie told often enough becomes the truth

In short, what the public sorely lacks is critical thinking. Yet the absence of critical thinking is what makes the public crucially vulnerable to political manipulation.

The UNwisdom Of The Crowd

``What I must do is all that concerns me, not what the people think. This rule, equally arduous in actual and in intellectual life, may serve for the whole distinction between greatness and meanness. It is the harder because you will always find those who think they know what is your duty better than you know it. It is easy in the world to live after the world's opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude.” Ralph Waldo Emerson, Self Reliance

The Follies of Groupthink

Groupthink is when people substitute the opinion of the consensus or the group for their own. It is a product of group cohesion, which leads to a deterioration of “mental efficiency, reality testing, and moral judgment”[1] or particularly the erosion of critical thinking.

This thought process also sacrifices independence, uniqueness, toleration of alternative perspectives and independent thinking in pursuit of group cohesiveness, mostly with the aim to reduce group conflict or maintain balance.

By casting off critical thinking, groupthink leads to hasty, irrational decisions and actions that could be harmful. Think fraternity violence.

If based on social psychologist Irving Janis’ 1970s study on groupthink, the eight symptoms are[2]: (bold emphasis and italics mine)

1. Illusion of invulnerability –Creates excessive optimism that encourages taking extreme risks.

2. Collective rationalization – Members discount warnings and do not reconsider their assumptions.

3. Belief in inherent morality – Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions.

4. Stereotyped views of out-groups – Negative views of “enemy” make effective responses to conflict seem unnecessary.

5. Direct pressure on dissenters – Members are under pressure not to express arguments against any of the group’s views.

6. Self-censorship – Doubts and deviations from the perceived group consensus are not expressed.

7. Illusion of unanimity – The majority view and judgments are assumed to be unanimous.

8. Self-appointed ‘mindguards’ – Members protect the group and the leader from information that is problematic or contradictory to the group’s cohesiveness, view, and/or decisions.

In other words, Groupthink embodies the psychological properties that characterize most religious, political and economic forms of social zealotry.

Applied to investing, groupthink represents as the wisdom of the crowd at the extreme levels or near the inflection point of any major trend.

The Wisdom Of The Crowds

In analysing social aspects of life, crowd psychology always operate as very critical factors in determining the sentiment and the possible path of people’s action. This means that crowd psychology does not represent random walk, but as collective sentiment brought about by the crowd’s reaction to the fluid circumstances they are faced with.

Whether vetting on the outcome of national elections, observing the behaviour of horse racing enthusiasts or examining the behaviour the financial markets or the real economy, we run a common ground of crowd psychology in different stages.

The crowd psychology comprises as form of social signalling.

Since people are intrinsically social animals, we always have the frequent sublime need to commune as group, and such is the reason why society has ultimately flourished over the centuries, even amidst the destructive impulses likewise inherent in men to dominate and to plunder (that has led to wars).

Ever since the eons of our prehistoric ancestors, as hunters, our progenitors operated on groups (tribes) to seek protection from among each other, to have a greater chance of attaining the goal of a successful hunt, and importantly, to achieve posterity via gene reproduction purposes.

Conforming to these social patterns is how man’s actions have mostly been directed.

As example “Keeping up with the Jones’” is a common catchphrase that signifies attempts by the individual to emulate an elevated social status in terms material possessions.

The crowd psychology also represents a form of tradition.

For instance the perpetuation of various forms of superstitions, such as in politics, are part of the tradition based crowd psychology.

As English philosopher and liberal political theorist Herbert Spencer once wrote[3],

“The great political superstition of the past was the divine right of kings. The great political superstition of the present is the divine right of parliaments. The oil of anointing seems unawares to have dripped from the head of the one on to the heads of the many, and given sacredness to them also and to their decrees.” (emphasis added)

Applied to politics, the crowd psychology hardly distinguishes between functioning reality and the romanticized expectations of government as supermen.

Traditionalism also finds its way deeply rooted into culture, economics, religion and others aspects of social life.

Of course traditionalism via the crowd psychology can also be used as an escape mechanism.

In Henry Kaufman’s Memoirs, he writes[4],

``Most predictions fall within a rather narrow range that does not deviate from consensus views in the financial community. In large measure, this reflects an all-too-human propensity to minimize risk and avoid isolation. There is, after all, comfort in running with the crowd. Doing so makes it impossible to be singled out for being wrong, and allows one to avoid envy or resentment that often inflicts those who are right more often than not.” (emphasis added)

In other words, traditionalism, or applied conventionally, could be used as an advantage to secure social acceptance.

As in the case above, it can be used to as pretext to elude responsibility. And conversely, as ploy to generate ‘networking’ effects.

A good example of this is from Prof Angelo Codevilla[5], who aptly he describes how the American ruling class have used traditionalism (conventionalism) to secure their current position.

``Today's ruling class, from Boston to San Diego, was formed by an educational system that exposed them to the same ideas and gave them remarkably uniform guidance, as well as tastes and habits. These amount to a social canon of judgments about good and evil, complete with secular sacred history, sins (against minorities and the environment), and saints. Using the right words and avoiding the wrong ones when referring to such matters -- speaking the "in" language -- serves as a badge of identity. Regardless of what business or profession they are in, their road up included government channels and government money because, as government has grown, its boundary with the rest of American life has become indistinct.” (emphasis added)

In short, to be sociologically “IN” means to assimilate conventional ‘uniform’ behavior, de facto ethics and morality as normative.

Importantly, crowd psychology is a form of social expression.

Political elections are the strongest demonstrations of crowd expression.

And so with market bubbles, as James Surowiecki writes[6],

``Bubbles and crashes are textbook examples of collective decision making gone wrong. In a bubble, all of the conditions that make groups intelligent -- independence, diversity, private judgement--disappear.” (emphasis added)

Crowd psychology isn’t always wrong though.

In financial markets crowd psychology can be depicted by trends. Major trends, for instance, are emblematic of the direction of the dominance of crowd behaviour.

As Shawn Andrew of Ricercar Fund observed[7],

“The CROWD is always wrong at market turning points but often times right once a trend sets in. The reason many market fighters go broke is they believe the CROWD is always wrong. There is nothing further from the truth. Unless volatility is extremely low or very high one should think twice before betting against the CROWD.” (all caps original)

The fact of the matter is that it is groupthink or the excessiveness of the crowd to impetuously gravitate towards the collective opinion as the assumed gospel of truth that creates such instability.

Of course, this can only happen when underlying incentives are set to condition people’s mind. Such conditions, in terms of financial markets, include government policies as interest rate manipulation, inflationism, tax policies, the picking winners or losers and etc...

Lessons From The Crowd

So what are the lessons we should learn?

Crowd psychology is a very essential variable in determining social trends (political, economic, and financial trends)

In financial markets, the flow with the crowd is useful for as long as they reflect on the general trend, and for as long as conditions are yet distant from reaching groupthink status.

Groupthink fallacy is the surrender of one’s opinion for the collective. This accounts for as a loss of critical thinking and is reflective of emotional impulses in the decision making of the crowd. When groupthink becomes the dominant mindset of the crowd, an ensuing volatile episode can be expected to occur applied to both markets and politics (bubble implosion or political upheaval).

Though crowd-following is useful, doing what the crowd does isn’t. This prominent quote from a movie character Alan Ashley-Pitt in Quigley Down Under, says it all[8]

"The man who follows the crowd will usually get no further than the crowd. The man who walks alone is likely to find himself in places no one has ever been."

That’s because thinking with the crowd exposes one to deep vulnerability, since crowd psychology hardly represents what the reality is. This is especially pertinent to the markets or even to politics.

Gustave Le Bon[9] spared no sympathy on the crowd’s unintelligence, he wrote,

``This very fact that crowds possess in common ordinary qualities explains why they can never accomplish acts demanding a high degree of intelligence. The decisions affecting matters of general interest come to by an assembly of men of distinction, but specialists in different walks of life, are not sensibly superior to the decisions that would be adopted by a gathering of imbeciles. The truth is, they can only bring to bear in common on the work in hand those mediocre qualities which are the birthright of every average individual. In crowds it is stupidity and not mother-wit that is accumulated.” (emphasis added)

And it’s not just Mr. Le Bon, but likewise one of the world’s richest and most successful investor, Mr. Warren Buffett, the sage of Omaha, subtlety admonishes people from using crowd psychology as justification to trade or invest[10],

"A great IQ is not needed to do well as an investor, what is needed is the ability to detach yourself from the crowd."

Why? Because what matters is independent ‘critical’ thinking! This ability, in my opinion, is to get within the ambit of what is consistently effective or what works and what doesn’t.

Author James Surowiecki sees non-correlation and diversity of knowledge as important variables to independent thinking, he writes[11]

``Independence is important to intelligent decision making for two reasons. First, it keeps the mistakes that people make from becoming correlated. Errors in individual judgement won't wreck the group's collective judgement as long as those errors aren't systematically pointing in the same direction. One of the quickest ways to make people's judgements systematically biased is to make them dependent on each other for information. Second, independent individuals are more likely to have a new information rather than the same old data everyone is already familiar with. The smartest groups, then, are made up of people with diverse perspectives who are able to stay independent of each other. Independence doesn't imply rationality or impartiality though. You can be biased and irrational, but as long as you're independent, you won't make the group any dumber.”

Since groupthink extinguishes personal opinion for the collective then the variability of information becomes eroded and homogenized and thus expanding the potential errors of the consensus in their assessment and their succeeding courses of action. Thus, independent thinking not only maintains the diversity of opinion and information, but should likewise be representative of more “efficient” markets.

Nevertheless, the groupthink phases of crowd psychology should be taken advantage of by people in the know.

THUS, people who think for themselves, who are not afraid to get socially ostracized and or lose ‘temporal’ acceptance via conformity or signalling, or are prepared to go against conventionalism/traditionalism are the people who are likely to work through with right actions derived from pertinent independent analysis.

If there is one single market today which resonates actions of a bubble matched by groupthink psychology it is the US treasury markets.

The 10 year treasury whose bond yields are near the 3 decade long lows (left window), which I flipped to demonstrate the degree of the bubble action (red upside trend at the right window) is currently matched by the humdrum of daily fervid incantations of mainstream opinion makers and their followers, pumped up by from the insights of policymakers, of the mythical “deflation”.

As a caveat, let me repeat “mythical”, in the world of central banking, deflation would only exist once policymakers abandon to use of the printing press and accept the dominance of market forces.

This isn’t happening.

---

[1] Psysr.org, What is Group Think

[2] Ibid

[3] Spencer, Herbert, The Great Political Superstition (1884)

[4] Random Roving Blogspot, Running With The Crowd

[5] Codevilla Angelo M. Codevilla America's Ruling Class -- And the Perils of Revolution, Spectator.org

[6] Surowiecki, James The Wisdom of The Crowd (p 244) bloggiaim.com

[7] Andrew, Shawn; Jeffrey Hirsch Stock Trader’s Almanac 2010

[8] Iwise.com, Alan Ashley-Pitt

[9] Le Bon, Gustave Le Bon The Crowd p. 17

[10] MoneyCentral MSN.com 12 steps to being a 'Zen millionaire'

[11] Surowiecki, James loc sit