Think Like the Great Investors: Make Better Decisions and Raise Your Investing to a New Level

Chapter 24

Notes and commentary on Gustave Le Bon’s The Crowd

It is over twenty years since I first read Gustave Le Bon’s great classic The Crowd. Re-reading it, I was struck by how relevant this book, written in 1895, still is to our understanding of what happens in the markets.

Le Bon wrote in French. The translation to English undoubtedly loses a little of his meaning. Moreover, the language is very much that of over a century ago and therefore difficult for many people to assimilate today. To relate Le Bon’s ideas on crowd behaviour to markets, I have reproduced some pertinent quotations I copied from the book and followed them with my comments. So that you know which are Le Bon’s thoughts and which are mine, the notes I made from the text are indented and appear in a different font.

Author’s Preface

Racial characteristics normally determine how a person acts. However, when gathered together in a crowd for the purposes of action, the mere fact of them being assembled results in new psychological characteristics that modify significantly their racial characteristics.

Le Bon probably would not have used the word ‘racial’ today. My reading of Le Bon’s meaning is that he used the term in the absence of a better one. Today I think we would describe what he meant as cultural in the broad sense of the inherited and learned attitudes, beliefs and opinions that each of us has developed ...