There’s at least one very big problem with this sort of majoritarian herding: If everyone did it, it wouldn’t work in the least. You need a substantial proportion of people actually trying to get the right answer in order for “going with the herd” to get you anywhere. And even then, it will only get you the average; you’ll never beat the average by going with the average. (And don’t you think that, say, Einstein beat the average?)
And in fact there are independent reasons from evolutionary psychology and memetics to suspect that everyone IS doing it, or at least a lot of people are doing it a lot of the time. Ask most Christians why they are Christian, and they won’t give you detailed theological reasons; they’ll shrug and say “It’s how I was raised”.
This is sort of analogous to the efficient market hypothesis, and the famous argument that you should never try to bet against the market because on average the market always wins. Well… if you actually look at the data, no it doesn’t, and people who bet against the market can in some cases become spectacularly rich. Moreover, the reason the market is as efficient as it is relies upon the fact that millions of people buy their stocks NOT in a Keynesian beauty contest, but instead based on the fundamental value of underlying assets. With enough value investors, people who just buy market-wide ETFs can do very well. But if there were no value investors (or worse, no underlying assets! A casino is an example of a market with options that have no underlying assets), buying ETFs would get you nowhere.
There’s at least one very big problem with this sort of majoritarian herding: If everyone did it, it wouldn’t work in the least. You need a substantial proportion of people actually trying to get the right answer in order for “going with the herd” to get you anywhere. And even then, it will only get you the average; you’ll never beat the average by going with the average. (And don’t you think that, say, Einstein beat the average?)
And in fact there are independent reasons from evolutionary psychology and memetics to suspect that everyone IS doing it, or at least a lot of people are doing it a lot of the time. Ask most Christians why they are Christian, and they won’t give you detailed theological reasons; they’ll shrug and say “It’s how I was raised”.
This is sort of analogous to the efficient market hypothesis, and the famous argument that you should never try to bet against the market because on average the market always wins. Well… if you actually look at the data, no it doesn’t, and people who bet against the market can in some cases become spectacularly rich. Moreover, the reason the market is as efficient as it is relies upon the fact that millions of people buy their stocks NOT in a Keynesian beauty contest, but instead based on the fundamental value of underlying assets. With enough value investors, people who just buy market-wide ETFs can do very well. But if there were no value investors (or worse, no underlying assets! A casino is an example of a market with options that have no underlying assets), buying ETFs would get you nowhere.