I’ve posted Entry #249 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Why We’re Reluctant to Take Advantage of What We Learned from Shiller’s Research.
Juicy Excerpt: The most powerful demonstration of the phenomenon is the famous research that was done by Solomon Asch in the 1950s. Asch arranged for groups of five to seven confederates to meet in a room with a single real experiment subject and answer questions about the lengths of lines on cards presented to them. Only 24 percent of the real participants gave accurate answers to questions in all circumstances. 75 percent conformed to the social pressures to give inaccurate answers in at least some circumstances. 5 percent conformed every time. The overall conformity rate was 37 percent. In a control group, in which there was no social pressure to give an erroneous answer, only one out of 35 participants gave incorrect answers to the questions asked.
Or perhaps not.
Participants were asked to explain why they gave incorrect answers. Many said that they knew that the answers were incorrect when they were giving them. They answered incorrectly to be polite!
We’re not really sheep. We’re just too nice to say what we truly believe when there are lots of our fellow humans expressing confidence in a very different story.
My experiences trying to spread the word about the exciting implications of Shiller’s work support this explanation. I have had many experiences in which people express great enthusiasm over the idea of learning more about how Valuation-Informed Indexing works. Then they hear Buy-and-Holders express emotional pain over Shiller’s findings. Then they get quiet. If I push, they get hostile to me.