Biggs on Finance, Economics, and the Stock Market: Barton's Market Chronicles from the Morgan Stanley Years

Section 6A: Book Reviews

“Groupthink” and What to Do about It

May 14, 1984

I have written about that deadly scourge “groupthink” before, but I just finished reading a new book (Groupthink, by Yale psychology professor Irving Janis, who originally identified the phenomenon) that has some remarkable insights. The book's analysis is so significant and startling that I think anyone who is a member of a decision-making committee should read it. The best defense against this intellectual cancer is awareness of it. In my opinion, almost every investment policy committee, including our own, is plagued to one extent or another by the ailment.

Janis describes groupthink in clinical language as a “mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' striving for unanimity overrides their motivation to realistically appraise alternative mental efficiency and reality testing ... a marked distortion in information processing that results from in-group pressures.” Bad judgment, lack of vigilance, and excessive risk taking are forms of temporary derangement to which decision-making groups of intelligent people are susceptible. As Nietzsche said, madness is the exception in individuals but the rule in groups.

Janis is not talking about a noncohesive, politically oriented group or a leader/dictator-manipulated group. Groupthink occurs even ...