To truly understand modern politics, investing, or financial risk management one must also understand the characteristics of the crowd mentality. Very few, if any, scholarship on this subject is part of a standard undergraduate or graduate business, economics, or international affairs curriculum--at least based on my experience. This kind of study has been primarily ensconced to the fields of psychology, albeit there have been small inroads being made over the last decade by way of the nascent behavioral economics/finance field. Crowds in and of themselves are not a necessarily a bad thing; rather what is important to note is their motive and objective in achieving a particular objective. People can form crowds to perform a benign service for their local community or can be amassed to undertake the most scandalous actions. I will focus, however, on the aspects of crowds in general.
Nature of Crowd Mentality
The very nature of crowds is one of uncertainty. Their collective wisdom resembles those of animals in the wild: at moments serene but at other times sheer madness can be evident. Perhaps this is what John Maynard Keynes referred to when he made his proclamation that the market was inhabited with "animal spirits." People en masse display a level of intelligence significantly below than the average individual. In fact, crowds can only understand very simple, catch-phrased words like "war on terror," "fighting for democracy", or "real estate prices always go up" without critically analyzing their inherent contradiction. Thus crowds do not exhibit an ability to be thoughtful, but always eradicate those things that stand in the way of what they have already imagined. The very fact that crowds are extremely gullible by words and images, given their lack of mental capacity to reason, they are susceptible to leaders or self-proclaimed experts who will control them to achieve a particular end. Leaders who understand this are able to puppeteer the people by connecting seemingly separate events as cogent evidence of what the crowds already believes.
The moment this happens the leader(s) has the people at his disposal to do whatever he/she desires. For example, during the technology stock market bubble many people believed they were going to get rich because they had bought the next Microsoft, yet no one bothered to understand that most of those businesses were inadequate. "Experts" hailed the "new economy." Initially everyone followed the crowd; prices rose. When irregularities emerged that in fact those business plans were inadequate, stocks were sold. Everyone followed the crowd; stocks fell and the market declined. In its heyday, no news could temper the rosy scenery painted by the market gurus. But in the downturn, positive news could not prevent almost everyone heading for the exits at the same times, thus prices fell through the floor.
Gustave Le Bon, the great French psychologist, described crowds this way: "A crowd thinks in images, and the image itself immediately calls up a series of other images, having no logical connection with the first. We can easily conceive this state by thinking of the fantastic succession of ideas to which we are sometimes led by calling up in our minds any fact. Our reason shows us the incoherence there is in these images, but a crowd is almost blind to this truth, and confuses with the real event what the deforming action of its imagination has superimposed thereon. A crowd scarcely distinguishes between the subjective and the objective. It accepts as real the images evoked in its mind, though they often have only a very distant relation with the observed fact (The Crowd, pgs. 24-25).
A recent article in the Financial Times about the presumptive presidential candidate Barack Obama gives further life to our analysis. In fact, Mr. Obama's current campaign is fascinating to watch. It resembles the dotcom boom/bust or the current real estate housing market experiences, in that glaring contradictions do not appear to molest market participants. Although it appears that his aura of invincibility may be wearing off. The FT article reports in part Mr. Obama's recent strategic European trip to impress upon voters at home of his abilities to maintain foreign support of U.S. activities, despite his non-existent international experience. What is worthwhile to note is a comment made by a former adviser to ex-President Clinton and to the 2000 Presidential campaign of Al Gore, who said the following: "What the last two weeks have shown is that Brack Obama is looking increasingly presidential which was, of course, the whole point of the trip and of yesterday's economic summit...It doesn't matter what else a voter thinks about a candidate, if they cannot imagine you as commander-in-chief then you will not become president. Last week's trip helps voters to imagine Obama in that role."
So there you have it, for those looking in from the outside the view is clear. The same analysis can be applied to most politicians, including John McCain. As someone I read once said, to paraphrase, either you're a contrarian or you're eventually a victim. I prefer the former.