2012-09-04

Value In A Crowd

As I mentioned last week, I intend to spend more time blogging about the value of individuality over collectivism.

Last week, I discussed how the breakdown is a little bit askew. We're not really talking about competing world-views here, we're talking about a perception of value. To some, being surrounded by fellow human beings is inherently valuable. And inasmuch as we are all social creatures who crave social experiences, that is very true.

But we do not live every second of our lives in a crowd. We do not act as agents of a crowd. In life, when you get right down to it, you only really control and act on behalf of yourself. To the extent that you do, you must learn the value of individualism.

The Group Always Misses The Best Deal
I recently finished reading a book called The Driver, by Garet Garrett (review forthcoming on this blog). At one point, a character central to the story describes that he got rich by "buying things that nobody else wanted."

The story is fiction, but the method is a good one. The number one rule of the stock market is "buy low, sell high," and because we are all fans of economics, we all understand that a low price occurs when demand is low, and a high price occurs when demand is high. That is, the more "everybody" wants something, the higher the price will rise; the more "nobody else wants it," the lower the price will fall. Speculation is the entrepreneurial act of buying what nobody else wants under the belief that in the future, more people will want it, and you will be able to sell it for a profit.

But what successful speculators will actually tell you is that they buy things that are undervalued, wait for prices to reflect true value, and then sell them. What the rest of the world overlooks, speculators see; with this foresight, they make their money.

First, A Stationary Waves Principle Of Coming Out On Top
There is a principle by which I have lived my life, which runs something to the effect of, When you see a crowd of people all going one direction, that's your queue to go the opposite direction.

I conceived of this rule in my most individualistic days, when I considered anything that the crowd was doing to be vicious. As I have grown and matured, I have since realized that crowds usually do things for good reasons; and yet, that has not altered my rule to even the slightest extent. Why not?

One important reason is a priori: If you only ever do what everybody else does, then you will only ever be as well-off as everybody else. I'm not talking just about money. The general idea here is simply this: It seems incredibly unlikely to me that everything of value in "life, the universe, and everything" has already been discovered and vetted by everyone else.

I believe I can find good deals on products and services when I shop, so I do my research. As it turns out, I can indeed find better deals than the "average price," and so I am correct in this case: the crowd would be better off if they went in a different direction (mine).

I believe small, mom-and-pop Mexican restaurants offer better food at more reasonable prices than the most popular Tex-Mex restaurants in my area. When I see lots of cars at a "Mexican" restaurant, I keep driving. I drive all the way to the more sparsely populated side of town, where I see restaurants that don't appear to cater to the crowd (as in, sometimes the menus aren't even offered in English). And I am usually correct: My choice of Mexican restaurants offer more authentic Mexican food at more competitive prices; the crowd would be better off if they went in a different direction (assuming they actually want authentic Mexican food).

The Value Of Education
Steven Landsburg has a good post on his blog about the folly of offering higher education to everyone. Landsburg's point is sharp and perfectly accurate: There is a limited supply of university education in the form of too few seats to accommodate the entire population of the nation. If we dropped the price to zero, where would all those students sit? It's not a trivial problem. There is only so much space in schools. Public primary schools wrestle with this problem constantly, and they're not even really free!

But in the comments section, I added another point: This is the internet age. We can learn anything we want to at the mere touch of a button. Right now, right this very minute, if you are reading this post then you have met all the requirements needed to know any academic point you can think of, period. No exaggeration. Just think up a question, browse to a search engine, and start reading. You can easily develop a comprehensive expertise this way.

On the other hand, what do people actually use the internet for? They use it for Facebook, for gaming, for watching sports and reading the news... In short, they use it for entertainment. The vast majority of web traffic is nothing more than "meaningless" entertainment. (Here, I use the term "meaningless" very loosely - there is a huge value in entertainment, but when you stop to consider that every secret of the known universe is ready at your fingertips 24/7, Farmville becomes even more ludicrous than it is already considered to be.)

Conclusion
Here is a perfect case-in-point for what I was saying about value in a crowd. While the crowd utilizes the internet in a certain way, some of us prefer to maximize value. There is information on the internet that was once deemed so precious that kingdoms went to war over it. If you're able to get it for free, you're getting a deal.

So, when we discuss individuality versus collectivism, one of the things we need to understand is the fact that always betting on the popular play - always sticking with the crowd when it comes to value (again, I'm not talking about just money here) - in many cases leaves you worse off than you could be if you acted alone.

To do that, you need the courage to be able to disregard the ridicule of the majority, who will scoff at you for not marching their way. But in the opposite direction lies an undervalued item, which can be put to incredibly valuable use in the right hands, in your hands.