George Orwell and the market

Charlie Munger riffs on the value of a liberal arts education all the time. Take looking at urban planning through the lens of math and the interesting results it yields. There are more satisfying conclusions one can reach from borrowing from all academic disciplines than ordering off a Chipotle menu (Over 65,000 combinations). I think a text one would find in an English class that demonstrates a driving force in pricing discrepancies and the misalignment of interests that rear their heads on Wall Street falls under this category. While there are absolutely psychological experiments that demonstrate such concepts, writers can articulate such observations in laymen’s terms in ways that resonate. George Orwell is known for the doublethink of 1984, but a lesser known story of his, Shooting an Elephant, is a demonstration of groupthink or the herd mentality that can grip investors and Wall Street. An unconventional perspective is important in investing and life, because one should not expect all manifestations of the herd mentality to be couched in academic terms or easily identifiable as such.

The story: As a result of his position and identity, an unnamed police officer, also the narrator, is forced to shoot an elephant. The reason for shooting the elephant turns out to be “solely to avoid looking a fool.” The man goes to a town to see an elephant that is allegedly causing destruction. He is the only British person in miles. He clearly states that it is a bad idea to shoot the elephant before he enters the town. Sometimes one’s environment can force them to act in such a way that they did not intend. There are 2,000 locals that gather around the narrator, at which point he is compelled to shoot the elephant.

Such situations are reminiscent of the underlying thought processes that make bubbles a common occurrence and even everyday poor investment decisions. The entire text can be found here and is short (no more than 10 minutes of your time). This is just another way to think about many of the factors involved in investing. Do not make financial decisions in the same manner that the aforementioned narrator does.

Talk to Andrew about liberal arts and investing