Bias 2: Herding Effect
We are all influenced by the opinions expressed by others when making decisions. This natural tendency results from the anchoring effect, which occurs when we rely too heavily on the first piece of information, no matter how irrelevant, when making decisions.
Psychological experiments have shown that asking participants the last two numbers of their credit card influences their posterior evaluation of the price of a bottle of wine. Similarly, if we are asked for our favorite restaurant for lunch, the prior answer of a colleague will influence us. In the past, if we did not trust our colleague’s culinary tastes, we will certainly not give the same answer. Otherwise, we may certainly give the same answer, especially if we have no strong preferences. The latter scenario is called conformism or the herding effect.
This is a tendency to follow opinions, judgments or preferences of others. We naturally tend to be more conformist than polemical. The more people have a particular behavior or opinion, the more we follow. The herding effect is often an explanatory factor for financial crashes or booms. Seeing investors around us selling or buying assets all at once pushes us to do the same thing, without thinking about the profitability of such decisions.
A famous and funny experiment to measure the herding effect was carried out in the 1970s by the psychologist Asch. Participants were required to identify the tallest among three sticks (A,B,C) projected on a screen. Looking at the picture, it is obvious that Stick C was the tallest. Nevertheless, if all other participants (in reality, it was the experimenters pretending to be the other participants) chose Stick A, the majority of real participants would choose Stick A as well. The experiment has been video-taped and is shown below:
Why are we so biased by the behavior, no matter how irrational, of others? The theory of some neuroscientists, though still controversial, indicates that some of our neurons, aptly named mirror-neurons, make us mimic the behavior of others. These neurons are also present in many mammals and birds. For example, one pigeon is taking flight in the street, then dozens of pigeons behind it will do the same. Repeat the same gesture in front of a monkey, like raising your hand, and the monkey will imitate you by doing the same gesture. Gregarian human beings would have kept the same capability to mimic their peers automatically.
In a more sophisticated way, we are empathetic and can feel others’ emotions. We feel bad when we see people on TV victims of an earthquake on the other side of the world. Similarly we tend to mimic the opinions and decisions of our peers, even when it does not make sense.