Groupthink, a term coined by social psychologist Irving Janis (1972), occurs when a group makes faulty decisions because group pressures lead to a deterioration of “mental efficiency, reality testing, and moral judgment”. Groups affected by groupthink ignore alternatives and tend to take irrational actions that dehumanize other groups. A group is especially vulnerable to groupthink when its members are similar in background, when the group is insulated from outside opinions, and when there are no clear rules for decision making. (1)
Simply, this is how companies, governments, investors and families and individuals drive themselves over cliffs:
- Bad mergers
- Bad proposed laws or invasions
- Investment fads
- Poor decisions about marriage, divorce of having kids
- Suicide bombers
just to name a few examples.
The process is pretty simple. You surround yourself with people who share your opinions and use that agreement to reinforce your beliefs regardless of any contradictory information. Then you make important decisions based on those beliefs. Then you just have to wait for the crash.
No one is immune from groupthink. In fact, human nature tends to encourage it. Most people are conflict-adverse. They don’t like tension. They don’t like disagreement. So they gravitate to people who share like opinions and don’t say anything if they disagree.
Companies make merger decisions based in part on groupthink, which helps to explain why 90% of them fail. Spend a lot of money to buy a company, then sell it cheap when the merger fails. Great for shareholder value. Examples:
- 2008 Arby’s acquisition of Wendy’s. That merger lasted 3 years.
- Also in 2008, Bank of America’s purchase of Countrywide financial. “The bank paid just $2.5 billion for Countrywide, a deal that ended up costing the bank more than $40 billion.”(2)
- The combination of K-Mart and Sears. Yep, that’s worked.
Politicians and generals make bad decisions on a regular basis.
- How about the 2003 invasion of Iraq, looking for phantom weapons of mass destruction. Despite the evidence, some people still believe they were real, instead of the imagining of disgruntled Iraqi emigres who wanted the US to toss Sadam.
- What about the current debacle over healthcare reform? Clearly a group in the Trump administration felt that Congress would submissively obey their demands.
The fiberoptic cable investment bubble of the late 1990s is an example of groupthink. It was mathematically impossible for demand to double every year, but during the bubble, no one thought about it.
Marriages can begin or end influenced by groupthink. In this case, it’s called peer pressure, but that may not be as good a term. Being surrounded by people who think a marriage or divorce should happen increases the odds that it will happen.
Suicide bombers? How does anyone with any intelligence convince themselves that there are 46 virgins waiting to greet them in an afterlife? By surrounding themselves with people who share the fantasy and drawing strength of conviction of peers. To some extent, that’s how every religion and political movement works.
How do you avoid groupthink?
- Recognize that smart people will have different points of view on virtually any important issue.
- Surround yourself with smart people, not “yes people”.
- Listen to differing points of view. Encourage debate. Understand the values that are competing in any decision.
- Avoid labels that antagonize. They inhibit open discussion.
- Find data that both support and contradict. Don’t ignore data that disagree. Instead, figure out how it makes sense and how it changes the decisions you need to make.
- Read Kuhn’s “Structure of Scientific Revolutions.” This thin book should be required reading for anyone with a brain.
Above all, remember, humans don’t do perfect. If you think something is perfect, you’re missing something important. If you think you have all the answers, you’re wrong. Unless you’re a god, of course.
- Huffington Post, “9 Mergers that Epically Failed,” 23 February 2013. http://www.huffingtonpost.com/2013/02/23/worst-mergers-of-all-time_n_2720121.html
- “5 Odd Things that Raise Your Chances of Divorce,” Newser, 2 June 2015. http://www.newser.com/story/207687/5-odd-things-that-raise-your-chances-of-divorce.html