Herd mentality

Herd mentality describes how people are influenced by their peers to adopt certain behaviors, follow trends, and/or purchase items. Examples of the herd mentality include the early adopters of high technology products such as cell phones and iPods, as well as stock market trends, fashions in apparel, cars, home décor, etc. Social psychologists study the related topics of group intelligence, crowd wisdom, and decentralized decision making. Marketing and behavioral finance researchers study the effects of the herd mentality on consumer behavior and stock market investments, including topics such as early adopters, prediction markets, and Delphi methods for predicting buying patterns. Corporate marketing forecasters attempt to produce accurate pictures of future consumer behavior using the above-referenced methods of understanding.

Definition
The term herd mentality is derived from the word “herd,” meaning group of animals, and “mentality,” implying a certain frame of mind. However the most succinct definition would be: how large numbers of people act in the same ways at the same times. Herd behavior is distinguished from herd mentality because it applies to all animals, whereas the term “mentality” implies a uniquely human phenomenon. Herd mentality implies a fear-based reaction to peer pressure which makes individuals act in order to avoid feeling “left behind” from the group.

History
Herd mentality and herd behavior have been prevalent descriptors for human behavior since people began to form tribes, migrate in groups, and perform cooperative marketing and agricultural functions. The idea of a "group mind" or "mob behavior" was first put forward by 19th century French social psychologists Gabriel Tarde and Gustav Le Bon. Herd behavior in human societies has also been studied by Sigmund Freud and Wilfred Trotter, whose book Herd Instincts in Peace and War is a classic in the field of social psychology. Sociologist and Economist Thorstein Veblen’s Theory of the Leisure Class illustrates how individuals imitate other group members of higher social status in their consumer behavior. More recently, Malcolm Gladwell in The Tipping Point, examines how cultural, social, and economic factors converge to create trends in consumer behavior. In 2004, the New Yorker’s financial columnist James Suroweicki published, The Wisdom of Crowds.

Twenty-first century academic fields such as marketing and behavioral finance attempt to identify and predict the rational and irrational behavior of investors. (See the work of Daniel Kahneman, Robert Shiller, Vernon Smith, and Amos Tversky.) Driven by emotional reactions such as greed and fear, investors can be seen to join in frenetic purchasing and sales of stocks, creating bubbles and crashes.

References and further reading

 * Bloom, Howard, The Global Brain: The Evolution of Mass Mind from the Big Bang to the 21st Century. (2000) John Wiley & Sons, New York.
 * Freud, Sigmund's Massenpsychologie und Ich-Analyse (1921; English translation Group Psychology and the Analysis of the Ego, *1922). Reprinted 1959 Liveright, New York.
 * Gladwell, Malcolm, The Tipping Point: How Little Things Can Make a Big Difference. (2002) Little, Brown & Co., Boston.
 * Le Bon, Gustav, Les Lois psychologiques de l'évolution des peuples. (1894) National Library of France, Paris.
 * Le Bon, Gustave, The Crowd: A Study of the Popular Mind. (1895) Project Gutenberg.
 * Trotter, Wilfred, Instincts of the Herd in Peace and War. (1915) Macmillan, New York.
 * Suroweicki, James: The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, *Societies and Nations. (2004) Little, Brown, Boston.
 * Sunstein, Cass, Infotopia: How Many Minds Produce Knowledge. (2006) Oxford University Press, Oxford, United Kingdom.