Rolf Dobelli wrote this in The Art of Thinking Clearly…
Have you ever bitten your tongue in a meeting? Surely. You sit there, say nothing and nod along to proposals. After all, you don’t want to be the (eternal) naysayer. Moreover, you might not be 100% sure why you disagree, whereas the others are unanimous – and far from stupid. So you keep your mouth shut for another day.
When everyone thinks and acts like this, groupthink is at work: this is where a group of smart people makes reckless decisions because everyone aligns their opinions with the supposed consensus. Thus, motions are passed that each individual group member would have rejected if no peer pressure had been involved.
Nowhere do you see groupthink than in the world of business and investing.
Whether it’s the case of a CEO allocating capital, or an investor doing so, it’s easy to fall into groupthink and allocate precious cash on things that “seem” right because others also think so, rather than those that “are” right.