Throughout history, the human race has produced many different mindsets and personalities. Some of us are aggressive, while others are passive. Some of us optimists, and some pessimists. Optimists design airplanes, while pessimists design the seatbelts. Mankind needs both. These characteristics can be traced back to one’s genetic disposition, while many other traits can be linked to the group or environment individuals were raised in or decided to be part of… aka their Tribe.
Tribal mentality is when people behave as if they belong to a particular group (or tribe) and tend to support and defend the interests of their group, even when it is not in their best interest. Think conservatives vs. liberals vs. libertarians. Think Eastern vs. Western medicine. Think religion—the biggest tribes of all. None of these are wrong or right, nor better than the other. It just happens because, well, we like common company and others to confirm our beliefs.
We all have some type of tribal mentality. You may be thinking, ‘I don’t belong to a tribe, I’m independent.’ Well, my guess is that you love hanging out and conversing with other independent thinkers? There’s your tribe. Everyone belongs to a tribe and underestimates how influential that tribe is on their thinking. Gravitating toward like-minded individuals who share your beliefs is just natural human behavior.
The tribal mentality is not just strong in the above mentioned realms. It lives and breathes heavily in the world of finance, too. Some examples:
There are various online investing groups where people with similar investment styles or beliefs come together to share information and trade tips. One of the largest of these is Bogleheads.com. The name paying homage to the late and great founder, Jack Bogle, of investment powerhouse, Vanguard. Mr. Bogle’s approach to investing changed the industry’s direction when he pulled the cover off of heavy fees and inefficient active asset management. At the time, he was looked at as someone who betrayed his tribe. Little did his haters know that he would create one of the most prominent tribes in the investing industry today. Believe it or not, there are many that still fight his logic. To that I say please put down the kool-aid.
The Bogleheads.com web forum has more than 120,000 registered members who converse daily on the topics of personal finance, investing, economics, budgeting, etc. What once was independent thinking 40+ years ago has now become a cult-like following of collective thought.
Tribal behavior in investing can also be seen when investors follow the crowd and invest in the same stocks or assets as everyone else. For example, when a particular stock or asset becomes popular, many investors may jump on the bandwagon and invest in it, regardless of whether it is a good investment or not. This can lead to a bubble, where the price of the asset rises quickly and then crashes when the investors all try to sell at the same time.
Think back to the Meme Stock rally of 2021/2022. Struggling stocks like Gamestop were pumped online, higher and higher by a group of small investors who had a common mission in mind—beat the big firms who made bets that the stock would fall and make them pay. This led to a bubble in the stock, fried nerves, and (in the end) winners and losers by the time the bubble had burst.
The below chart is what a bubble looks like. Investors piled on, pushing the price upward in rapid fashion, many knowing nothing about the stock other than the fact that they wanted to ride the wave—until it crashed. Like people jumping onto a moving truck, they piled on as not to be left behind. Then the truck toppled, taking many victims. The lesson? Not all tribes take you where you want to go.
GameStop vs S&P 500:
Or let’s look at Bitcoin (Represented by Grayscale Bitcoin Trust GBTC). From $12 to $56 back to $12. Simply a game of ‘hot potato' at this time.
The culture of a company can also contribute to tribalism. If employees feel a strong connection to their company or industry, they may become overly protective of their own firm's stocks or investments. This can result in groupthink and a lack of diverse perspectives. Think of the Enron collapse in 2001. If you don't, feast your eyes HERE.
In investing, there is often a "herd mentality," where investors tend to follow the trend rather than doing their own research and analysis. This can lead to market bubbles or crashes, as people buy or sell stocks based on the actions of others rather than fundamental analysis. Maybe a major case of FOMO? Members of such groups can develop a strong sense of relatability and may become overly reliant on the opinions of their fellow group members, even if it goes against their own research and analysis. We see this on TikTok, Instragram and Twitter. The aforementioned meme stock rally is a great example of this.
People's political or national affiliations can also influence their investment decisions. For example, some people may be more likely to invest in companies based on their country of origin or political beliefs, rather than the actual financials and prospects of the company. This can lead to missed opportunities or poor investment decisions.
Meme Stock Crusaders, Crypto Currency Advocates and the debate between active and passive investing (which seems like it will never end), are just a few examples of present-day tribal mentalities. If CNBC’s studios were a bar, it is guaranteed that fights would break out, bottles would be thrown and bouncers would be needed, as heated battles rage on. All because one another’s tribe is in disagreement. Again, this has been happening since we were drawing on cave walls and grunting at each other while building fires with sticks.
Outside of finance, we are surrounded by tribe after tribe. Unions are another great example of what it means to travel with the herd. They create solidarity, rely on each other and move in lockstep (for the most part) to protect their own. Whether this is always a good thing is in the eye of the beholder. Does this thinking better society or worsen it? Maybe both?
But, the same goes for the financial industry. Some members of this industry are out there with one goal—make money. Others are led by a motive to truly help people with their finances, educate them, find ways to give less to the industry and more to their client’s pockets. Two different tribes. Wrong or right lies in the eye of the beholder. We tend to stick with our tribe.
Outside of the seriousness of finance, politics and business, two examples of tribal behavior that certainly come to mind are Jeep Wrangler owners and motorcyclists.
There has been a strong camaraderie between motorcyclists for decades. They look out for each other, share adventures, wave to each other upon passing and work with their tribe to do good for society. Like dog people and cat people, to motorcyclists, there are those who ride and then those who don’t know what they are missing.
Jeep Wrangler owners are a whole other tribe. Their history dates back to 1940, when the first Jeep was produced. Used initially as a versatile military vehicle, the Jeep Wrangler has become one of the most recognizable vehicles on the road today. But it doesn’t stop there. Jeep Wrangler owners have shared a brother and sisterhood dating back to 1952, when Jeep drivers began to gather for Jeep Jamborees. Annual get-togethers of food, fun, friendship and charity. This continues to happen across the globe, bringing thousands together to celebrate their love for off-roading, laughing, family values and freedom.
Jeep Jamboree Pre-meet Before 3 days on the Rubicon Trail
Own a Jeep Wrangler and you instantly feel part of the tribe. Owners wave on every pass, they look out for other Jeep owners that may have a roadside issue and you are considered friends without ever meeting. This is being tribal at its core. Park your Jeep next to another Jeep in a parking lot. Why? 99% of the time you won’t ever get a door ding. They look out for one another.
As we walk through life, it is always important to realize what tribe you gravitate towards and the influence they can have on all of us. If your tribe is pessimistic, you will likely follow suit and vice versa. If you want confirmation that your thoughts and actions are correct, there is always a tribe do the job. There is also a tribe that will do the contrary—it’s all in what you are looking to accomplish.