“Madness is a rare thing in individuals – but in groups, parties, peoples, and ages it is the rule.” ~ Friedrich Nietzsche
Just after 3 a.m., March 13, 1964 in New York City, Catherine Genovese, a 28-year old woman, was stabbed to death in a parking lot in front of her apartment complex. Catherine’s murder story could have drowned in the middle pages of most newspapers like many other crime stories, except that it didn’t.
Catherine’s murder wasn’t a quick, muffled death. It had been a long, loud, tortured, public event. The killer had chased and attacked her in the street three times over a period of thirty-five minutes before his knife finally silenced her cries for help.
Shockingly, thirty-eight people, all in the surrounding apartments, witnessed at least one of her killer’s three attacks from the safety of their apartment windows for 25 minutes without calling the police.
The story has since been thoroughly debunked, a case of sensational reporting, but at the time it was written it led to intense interest in the phenomenon from psychologists. Even if there is a ten percent truth to above story, it’s a baffling account of a crime, not because it was a murder, but because “good people” failed to call the police.
Why didn’t the neighbours help? Were they indifferent? Frightened? Why should they be afraid of calling the police from the safety of their own homes? Has the violence on TV and movies made people so insensitive? Was it the beginning of a new epidemic known as large scale social apathy?
Interview with the witnesses revealed none of these explanations was the real reason behind people’s inaction.
I found Genovese’s story in Robert Cialdini’s masterpiece, Influence – The Psychology of Persuasion. Cialdini writes –
A simple anonymous call to the police could have saved Catherine without threatening the witness’s future safety or free time. No, it wasn’t the observers’ fear or reluctance to complicate their lives that explained their lack of action; something else was going on there…They[social psychologists] examined the reports of the Genovese incident and, on the basis of their knowledge of social psychology, hit on what had seemed the most unlikely explanation of all – it was that thirty-eight witnesses were present…no one had helped precisely because there were so many observers.
This is called The Bystander Effect, which basically states that as humans, we don’t only imitate good actions, but we also have a tendency to follow wrong actions and inactions of fellow humans.
Diffusion of Responsibility
When several people, potential helpers, around you are witnessing the same event, the personal responsibility of each individual reduces. It’s called diffusion of responsibility.
Have you ever seen someone broken down on the side of the road and thought, “I could help them, but I’m sure someone will be along.” Everyone thinks that. And no one stops. Watch the following video of a social experiment which demonstrates the bystander effect.
In a crowd, your inclination to rush to someone’s aid fades, as if diluted by the potential of the group. Everyone thinks someone is going to eventually do something, but with everyone waiting together, no one does.
To be able to extend any help we must interpret an event as an emergency. When we are uncertain, we have a tendency to look at people around us to see how they react. If others don’t react, we interpret that as evidence that it is not an emergency, and we therefore don’t react. We don’t want to be the ones that stand out in a crowd and risk embarrassment for acting in a non-emergency situation.
Fear of embarrassment plays a big role into group dynamics. Talking about fear of embarrassment, it should be obvious to see that bystander effect is founded on the principle of Social Proof.
But here comes the problem. If each person reasons the same way, everyone draws the same conclusion. “Since nobody is concerned, nothing is wrong. It can’t be an emergency. ”
Sometimes it’s also termed as Pluralistic Ignorance – a psychological state characterized by the belief that one’s private thoughts are different from those of others. Simply put, it’s a situation where everyone is thinking the same thing but believes he or she is the only person who thinks it.
When it comes to explaining behavioural biases humorously, there is no one who can do it better than Dan Ariely, author of wildly popular book Predictably Irrational. Dan, in this short video, not only explains but demonstrates (watch it till the end) the idea of pluralistic ignorance-
Social psychologists determined that when the potential helper doesn’t see anyone around, except the victim, he’s more likely to come forward for help. So the more people present when a person needs emergency help, the less likely it is any one of them will lend a hand.
What aggravates pluralistic ignorance? Cialdini writes –
It seems that the pluralistic ignorance effect is strongest among strangers: Because we like to look poised and sophisticated in public.
I suspect if people were to witness the Genovese murder case in present time, instead of watching silently they would, probably and unfortunately, tweet about it.
Breaking Spell of Pluralistic Ignorance
So the two primary factors that create bystander effect is uncertainty about the emergency and diffusion of responsibility. If we can address these two things, we can break the spell of pluralistic ignorance.
Many studies have shown it takes only one person to help for others to join in. Whether it is to donate blood, assist someone in changing a tire, drop money into a performer’s coffers, or stop a fight—people rush to help once they see another person leading by example.
In fact it’s usually not the first person but the second one who tips the attention of the crowd. See this video where the first follower converts a lone nut’s dance into a movement.
God forbid, if you ever find yourself in a situation where you’re the one who needs the help and people around you seemed to be under a strong spell of Bystander effect, what should you do?
The key is to first realize that bystanders fail to help, not because they are unkind, but because they are unsure. They are still guessing whether an emergency actually exists and whether they are responsible for taking action.
Should you cry for help? No, that doesn’t work as we have seen in the case of Catherine Genovese. Cialdini suggests –
Based on the research findings we have seen, my advice would be to isolate one individual from the crowd: Stare, speak and point directly at that person and on one else: “You, sir, in the blue jacket, I need help. Call an ambulance.” With that one utterance you should dispel all the uncertainties that might prevent or delay help…In general, then, you best strategy when in need of emergency help is to reduce the uncertainties of those around you concerning your condition…Be as precise as possible about your need for aid. Do not allow bystanders to come to their own conclusions because, especially in a crowd, the principle of social proof and the consequent pluralistic ignorance effect might well cause them to view your situation as nonemergency.
When a person realizes that he’s the one responsible for taking an action, bystander effect disappears. There is no diffusion of responsibility.
So the takeaway here is to remember you are not so smart when it comes to helping people. In a crowded room, or a public street, you can expect people to freeze up and look around at one another.
I hope you remember the fairy tale about The Emperor’s New Clothes where everyone pretends the king is wearing clothes, until a child points out the emperor isn’t wearing any clothes. Whether it’s the naked emperor or a ragpicker dying on street, the Bystander Effect gives both of them an equal treatment – a stare of ignorance.
Bystander Effect in Investing
Warren Buffett says –
We derive no comfort because important people, vocal people, or great numbers of people agree with us. Nor do we derive comfort if they don’t.
A stock price may or may not reflect the true value of the underlying business, however what it does reflect, at all times, is either the pluralistic ignorance or the wisdom of the crowd. How would you know?
Is the falling stock price really an emergency situation i.e. is the underlying business is deteriorating? Does it require your intervention, in terms of selling your holding or buying more? Why is nobody buying a particular stock which is languishing in spite of a great underlying business?
May be it’s a victim of bystander effect. But how do you know?
The only way you can know that is by becoming an independent thinker. By not letting the uncertainty and the diffusion of responsibility let you affect. Decide for yourself, do your own evaluation, think independently and then take action.
As we have seen in the case of the lone dancer in the video, you could be the first follower, the first mover and then you will reap the benefits when the crowd follows you.
Bystander Effect in Business
Most of the so called “independent directors” on the boards of publicly listed companies are mere bystanders. Even if some of them feel that the CEO of the company is taking wrong decisions, they rarely raise a voice against it.
And the reason is again the same – uncertainty and diffusion of responsibility. Most independent directors sit on the board to help the CEO comply to regulation for a minimum number of independent directors. And of course the easy money (director’s compensation) doesn’t hurt.
When an independent director doesn’t understand the business of the company and/or doesn’t have the required experience to contribute to the decision making process for the company, it’s obvious that he/she will be uncertain about the quality of decisions that CEO takes. Moreover these people don’t have their skin in the game, i.e. their interests aren’t aligned with the minority shareholder, so their attitude is mostly – It’s not my responsibility.
Charlie Munger, while talking about social proof, said –
…the outside directors on a corporate board usually display the near ultimate form of inaction. They fail to object to anything much short of an axe murder until some public embarrassment of the board finally causes their intervention. A typical board-of-directors’ culture was once well described by my friend, Joe Rosenfield, as he said, “They asked me if I wanted to become a director of Northwest Bell, and it was the last thing they ever asked me.
In life and in business, the importance of independent thinking can never be over emphasized. It’s this one skill that will separate you from the crowd.
George Patton wisely summarized the idea in few words, “If everyone is thinking alike, then somebody isn’t thinking.”
Learning about mental models will not only make you smarter but can also save your life. After having seen the potentially dire consequences of bystander effect, you now know how to rescue yourself, if you ever find yourself a victim of emergency situation in a public place.
Charlie Munger once observed –
The more basic knowledge you have, the less new knowledge you have to get.
That’s why learning the fundamental ideas from major disciplines like physics, biology, math, psychology, history and economics and then remembering them in form of mental models will give you the highest return on investment (of your time and effort). Problems are solved better if you jump over the jurisdictional boundaries of multiple disciplines and grab the best ideas.
It won’t be an overstatement if I call these list of mental models as a cheat sheet which allows us to better understand when to follow and when to reject the conventional wisdom.
Vicarious learning is a very intelligent form of learning. Learning mental models is vicarious learning – learning from other people’s mistakes.
After all you don’t have to pee on an electric fence, quips Munger, “to know that it’s dangerous.”
Take care and keep learning.