Recently I watched an interview with Billionaire Warren Buffett regarding the current state of our economy and the collapse of the real estate market. He had a few thoughts on how people think and what is often referred to as the herd mentality. First Came the “Innovators”, then the “Imitators” and last, but certainly not the least, actually they are probably the majority the “Idiots”.
The “Innovators” had the vision, and without vision nothing will happen. This group of “Innovators” made out very well, and they should have, they were the initial investors in the real estate boom, there vision served them well.
The second group was the “Imitators”; this group did well also, why reinvent the wheel, there is nothing wrong in copying a good idea or strategy as long as it is still working.
The third group which is where most seem to fall into is what Buffet describes as the “Idiots”. This group seemed to not have a clue of how to invest or what to invest in, the herd mentality got the better of them. What drove this group was fear and greed, fear they would not get their share, and being greedy by nature they were willing to risk their families financial security, they saw others literally lining up, what they did not know, they were lining up for their financial slaughter, just like the cattle do at the slaughter house. Humans are not the only species with this herd mentality, fish school, cattle roam in herds, dogs hunt in packs, unfortunately we are the only species that accumulate more than we really need.
So how do we avoid this herd mentality in the future, Try educating ourselves about the real estate markets, or about anything else for that matter, look at its long history? By the way we are the only species that can do research in libraries and online, and we should before following the herd, had these “Idiots” done their homework they would have discovered that real estate over the past hundred years has appreciated at a modest six percent on average. When you see it appreciating at twenty to forty percent annually that should have raised a red flag, had you taken the time to educate your self like the “Innovators” and some of the “Imitators” did, far less people would be in the “Idiot” category including the bankers whose greedy appetite was the largest of all the” Idiots” .
The “Innovators” had the vision, and without vision nothing will happen. This group of “Innovators” made out very well, and they should have, they were the initial investors in the real estate boom, there vision served them well.
The second group was the “Imitators”; this group did well also, why reinvent the wheel, there is nothing wrong in copying a good idea or strategy as long as it is still working.
The third group which is where most seem to fall into is what Buffet describes as the “Idiots”. This group seemed to not have a clue of how to invest or what to invest in, the herd mentality got the better of them. What drove this group was fear and greed, fear they would not get their share, and being greedy by nature they were willing to risk their families financial security, they saw others literally lining up, what they did not know, they were lining up for their financial slaughter, just like the cattle do at the slaughter house. Humans are not the only species with this herd mentality, fish school, cattle roam in herds, dogs hunt in packs, unfortunately we are the only species that accumulate more than we really need.
So how do we avoid this herd mentality in the future, Try educating ourselves about the real estate markets, or about anything else for that matter, look at its long history? By the way we are the only species that can do research in libraries and online, and we should before following the herd, had these “Idiots” done their homework they would have discovered that real estate over the past hundred years has appreciated at a modest six percent on average. When you see it appreciating at twenty to forty percent annually that should have raised a red flag, had you taken the time to educate your self like the “Innovators” and some of the “Imitators” did, far less people would be in the “Idiot” category including the bankers whose greedy appetite was the largest of all the” Idiots” .
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