Following the Financial Crowd… The 401k

Have you ever heard of the term “group think”? A group think experiment was done that demonstrated our natural instict to conform with the crowd. Do you remember the old show “Candid Camera.” It started back in 1948. I want to share a little clip from one of the old episodes… so old its black and white.

Funny Elevator Psychology

This is not far off from what is happening in our society today. William Wollman, who was Chief Economist of Business Week wrote the following in his book The Great 401(k) Hoax:

“The 401(k) will turn out to be the greatest systemic financial hoax ever perpetrated on an unsuspecting public.”

There are a lot of articles and books that indicate the origins of these government sponsored plans, but a lot of it relates to wall street and company lobbying. It benefited employers by ransferring the responsibility of retirement from the employer to the employee. You can find more information about the 401k on our 401k podcast.

Changing our mindset requires that we have a paradigm shift. Stephen Covey, in his book 7 Habits of Highly Effective People, emphasizes this idea with the following story:

Two battleships assigned to the training squadron had been at sea on maneuvers in heavy weather for several days. I was serving on the lead battleship and was on watch on the bridge as night fell. The visibility was poor with patchy fog, so the captain remained on the bridge keeping a eye on all activities.

Shortly after dark, the lookout on the wing of the bridge reported, “Light, bearing on the starboard bow.”

“Is it steady or moving astern?” the captain called out.

Lookout replied, “Steady, captain,” which meant we were on a dangerous collision course with that ship.

The captain then called the signalman, “Signal that ship: We are on a collision course, advise you change course 20 degrees.”

Back came a signal, “Advisable for you to change course 20 degrees.”

The captain said, “Send, I’m a captain, change course 20 degrees.”

“I’m a seaman second class,” came the reply. “You had better change course 20 degrees.”

By that time, the captain was furious. He spat out, “Send, I’m a battleship. Change course 20 degrees.”

Back came the flashing light, “I’m a lighthouse.”

We changed course.

What course are you on? Many of us are too busy following the crowd that we don’t realize that our battleship is heading straight for the rocks. Most of America is following the crowd and heading for financial devastation. Some of us have already been destroyed. My recommendation is to reanalyze, and adjust.


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By Jake | Follow Jake on Twitter