Market Analysis

The Bane of Conformity; The Boon of Truth

Conformity is the norm of human existence.

Conformity is the norm of human existence. Orthodoxy is built into the software of the mind. Compare any newspaper or magazine with another: you'll very quickly see people are generally talking about the same things. Inflation and interest rates are the topics of the day, and everyone's writing about them at the same time.

On a biological basis, neuroscience has made the significant discovery of "mirror neurons." These are neurons designed especially to mimic observed behavior, and are considered integral to how we learn and the cohesion of thought. For instance, let's say we want to learn how to play golf. If we simply watch an expert swing the club and hit the ball a few times, our chances of successfully hitting the ball the first time out are exponentially higher than if we hadn't seen a preview at all. That's precisely because our brains use mirror neurons as a powerful mechanism to replicate action.

Metaphysically, this principle is also reflected through Aristotle's idea of "Mimesis" (Mime-ee-sis). Within his theory of poetics, Aristotle thought narratives worked best when we empathize with the story presented. (For more on how story affect news, see yesterday's commentary: "Anecdote is no Antidote.")

Humans need mirror neurons for survival; for a society to have any cohesion whatsoever, mimicry and conformity are imperatives. But those things are a bane to successful investors.

Based upon the very simple notion that to be successful in stock investing, one must know something others do not, long have we at MarketMinder admired and studied the great physicists of history. Physics is perhaps the niche of science closest to good investing. It's in the conceptual imagining of the physical universe—where reality, mathematics, and imagination meet—new modes of knowing are discovered.

It's that last characteristic, imagination, that's the rub. Lacking it, we are condemned to be mere foot-soldiers, slaves to the mirror neuron. Physicists are tasked with comprehending the workings of the cosmos—a job explicitly impossible from the outset because the scope and complexity of the universe is clearly outside of the brain's ability to grasp. To combat this cognitive shortcoming, physicists use models, mathematics, and metaphors to explain the universe in terms humans can understand to at least dimly glimpse the universe's workings.

The same is true for investors. The global economy is far too large and interconnected—by many magnitudes—for any single mind to comprehend. We investors use the same tactics of economics—conceptual systems to explain how economies actually function—to try to understand the goings on of this vast global entity.

Thus, MarketMinder often takes the time to salute some of the great physicists in history. We particularly like the mavericks—those whose imaginations could not be contained by the conventions of their peers or society at large.

In past commentaries, we've saluted Nobel Laureate and all around wacky guy, Richard Feynman. But perhaps the ultimate 20th century exemplar of solitary, singular, and different thinking about the world was Albert Einstein. Here are some poignant quotes:

- "Imagination is more important than knowledge."

- "The important thing is not to stop questioning. Curiosity has its own reason for existing."

- "He who joyfully marches to music rank and file, has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would surely suffice."

- "Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."

- "Great spirits have always found violent opposition from mediocrities. The latter cannot understand it when a man does not thoughtlessly submit to hereditary prejudices but honestly and courageously uses his intelligence."

Einstein recently reentered the spotlight on the wings of a new best-selling biography by Walter Isaacson. Though not a word of it is economics related, this lucid portrait of Einstein's life may well be one of the best investing books you can pick up this year.

Einstein: His Life and Universe
By Walter Isaacson

Here is a man who shunned conformity, championed free-thinking, and mixed imagination with the corporeal to produce a unique genius. We're willing to bet that formula, should he have chosen to use it for such purposes, would have made for great investing too.

Have a great weekend.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.