This brings us, first and foremost, to the question of herd instincts, an all-too-human trait that frequently manifests itself in how we handle our finances. When rationality succumbs to intense emotions – doubt, panic, greed, fear – the extreme can quickly become the norm, even in matters of money. The run on Northern Rock represented a classic example.
This is because there is understandable comfort in conformity. If we see others act in a certain way then we tend to emulate them – even if, as often proves the case, their conduct is mistaken, imprudent or downright nonsensical. In the age of mass information, these herd instincts can be amplified all too easily.
Bear that in mind for a just moment and consider the merit of seeking anything less than expert advice on issues of genuine magnitude. Now consider, too, the findings of a recent study, carried out by the Nottingham School of Economics’ Centre for Decision Research and Experimental Economics (CeDEx), into the pros and cons of group decision-making.
A number of previous studies have sought to confirm or deny the old adage that “two heads are better than one”, with most of the evidence that has emerged to support the claim coming from experiments that have compared group decisions with individual decisions. It could be argued that in reality many significant choices are better construed as individual decisions that involve an element of consultation.
For example, we might talk to family and friends before deciding how to deal with a health problem. We might solicit all manner of non-specialist opinions before buying a car. Or we might get some advice before choosing how to invest.
These are not “eureka-type” scenarios in which a correct solution can be recognised through a formal system of reasoning. And it is in these situations that consultation may cause difficulties, as they offer a tougher test of how those with the correct knowledge can convey it to others.
To investigate this hypothesis, volunteers in CeDEx’s study were shown images of two paintings and asked to state which was by Paul Klee and which was by Wassily Kandinsky. Some subjects were placed in teams of six and invited to discuss the matter for five minutes, while others were asked to make their decision without conferring.