“…And here, one of the cases the psychologists use is Kitty Genovese, where all these people
-- I don’t know, 50, 60, 70 of them -- just sort of sat and did nothing while she was slowly
murdered. Now one of the explanations is that everybody looked at everybody else and
nobody else was doing anything, and so there’s automatic social proof that the right thing
to do is nothing. That’s not a good enough explanation for Kitty Genovese, in my
judgment. That’s only part of it. There are microeconomic ideas and gain/loss ratios and
so forth that also come into play. I think time and time again, in reality, psychological
notions and economic notions interplay, and the man who doesn’t understand both is a
damned fool.
Big-shot businessmen get into these waves of social proof. Do you remember some years
ago when one oil company bought a fertilizer company, and every other major oil
company practically ran out and bought a fertilizer company? And there was no more
damned reason for all these oil companies to buy fertilizer companies, but they didn’t
know exactly what to do, and if Exxon was doing it, it was good enough for Mobil, and
vice versa. I think they’re all gone now, but it was a total disaster. “
via: Munger
