Wisdom and Madness of Crowds in Cities.

It’s not an unusual topic. It’s rather common in investing….and I presume applicable in all facts of life. The credit to this inspiration comes from a night of running through Charlie Munger clips and a full talk by Peter Thiel at Stanford. 

I presume I’m conducting (with the help of Youtube/Google) self-hypnosis by re-watching the same things over and over again with enough of a time interval that it all seems rather new but still feels like it has some novelty. Like such videos, questioning crowds is one such unconscious thought that I wanted to bring to the forefront today in writing. 

As I continue to noodle over what city/country I should move to next (I truly do hope I won’t be one of those who merely talk about the next move)….the context of crowds is something of importance. With each major city having a distinct voice…one that seems amplified by the crowd it attracts and further compounds the sound of….I wonder if such a voice is mere madness or not. 

In the stock market, there is a view that it is semi-efficient. Schools teach students it’s efficient but that means people like Buffett couldn’t exist so we know that’s a stupid thing to teach. But, if it was never efficient, then great companies may never be valued highly. The companies that matter nowadays are Microsoft, Google, Facebook, Amazon etc… and are among the most valuable companies by the stock market (i.e. where people go to vote/voice their opinion with money). Hence, the market seems semi-efficient. 

So, in such a market, the crowd can seem wise…to a degree…at first. It can’t be something absolute but something that can be true on a spectrum. But yes…if a company stock price falls…on average it is probably a shitty company. So, you’re looking for moments when the crowd may have missed things. When they are a little slow. 

But when the crowd picks up on something…. It goes from wise to mad very fast. Eventually, they are all mad. In careers, this is all too common too. Most take on jobs for prestige over substance. Not to beat a dead horse but this isn’t news to anyone. I think Paul Graham said it best when he noted if the job didn’t suck, it wouldn’t have had to be prestigious. 

Thiel also beats the dead horse with the groupthink model of Harvard MBAs as well. Most went to tech in ’99 and most went to private equity and banking in ’07. From speaking with friends in MBAs now, most go to management consulting and banking….and the crowd is really tempting to follow for them as well….even when they know it isn’t the right option. 

The crowd may masquerade its madness through a veil of safety. Possibly, that’s what happens from being the smart thing to do (the early wise period of the small crowd….I guess these are early adopters?) to being the safe thing to do where you know it’s stupid but everyone does it. 

Maybe this is why there is merit to moving to a growing city and/or company. Aside from all the benefits of learnings, autonomy, etc… the crowds there might not be ‘mad’ yet. 

Yes NYC is the place for finance. LA is the place for entertainment. SF/SV is the place for startups. London is a mix of finance with the aristocracy. A belief is that it will have a greater opportunity for those who want to enter such fields. In some ways, those places might have made it even more bureaucratic and institutional to break in with its own set of standards and rules….ones that might make it seem rather mad. 

Though one will -possibly- meet many like-minded people….it might be in a place congregated by those who have similar interests but are not necessarily looking to elevate/grow that view. Growth and crowds seem antonyms. Your five closest people may be material in your growth but a crowd of 100 similar people might create a groupthink model similar to MBAs all marching to towards trends at peaks. 

Some cities might not have a distinct voice yet but being part of that early phenomenon might allow one to experience to the early formation of the ‘wise’ crowd. But how would one spot that? Not sure. 

Quite frankly, I love the convenience of large first-world cities….so that may through wrenches into adventures into fast-developing places. I write all this because I romanticize about cities like London, Singapore, and Sydney….though my visits might not be great examples…there is a curiosity that seems to contradict going to more ‘strategic’ places. 

It seems trite but such thoughts on crowds might be merely narratives I tell myself to support an existing view….or make it harder to chase curiosity as it contradicts my one-sided logic. 

Toronto could very likely be the place where the crowd of start-up folks are building up be ‘wise’….but I daresay, I feel there is a cultural conservative layer that creates a distinct voice from Silicon Valley…one that is rather too politically polite to actually innovate. I even wonder if it’s because the original voice of the city stems from Toronto being a financial city with conservative banking at its core. Comparatively… Vancouver is much more liberal….but it also lacks aggressiveness. 

Maybe all major cities…with distinct voices… have crowds that are all mad but it’s whether these cities can channel such voices to building new areas in the city and how that madness will translate. I imagine startups created in NYC will be aggressive, risk-taking, and immensely focused on finances. 

In light of such thoughts….maybe I should view all crowds as mad and be asking if I’d like to be part of the madness. So….onwards to find delusions I agree with.