Have you ever been to a restaurant? And not been able to figure out how it is that no matter when you go, you always have to wait? Or, been travelling and tried to find out why your suitcase is almost always among the last to emerge? Well, this is a little one about collective thinking ... And, in my incomparable style, i will try to link it to some principles.
At the office, we have the canteen. This is the place where we all go for Lunch. Now, lunch-time is usually from 1:00 pm, but then, you could go there before or after. Depends how hungry you are (which is why you would usually find me there at 12:30 pm).There used to be a time when the canteen would be empty at 12:30 pm, and you would get a nice place to sit and eat. This is actually how i started going for lunch at 12:30 pm. The peak crowd would be at around 1:30 pm, which is when most people would go to eat. However, over a period of time, for some reason, more and more people would come to eat at 12:30 pm, so that you wouldnt find a place to sit. This went on for some time, till recently, again, the crowd at 12:30 pm has dwindled, and more and more people go to eat at 1:30 pm.
The way i see it ... some folks got the bright idea, that you could beat the rush if you went an hour before the majority of the crowd went to eat. Thing is, a lot of people got the same idea, which is why a large part of the crowd switched from 1:30 pm to 12:30 pm. However, as more and more people got this idea, the canteen got overcrowded. Till, over a period of time, some folks got the brilliant idea that one could beat the rush by going there an hour later. And, soon, many of the folks got the same idea, and ...
Now, by now you are wondering what this has to do with economics. Just this ... this is probably the same logic by which prices in markets are regulated ... if prices are too low, so many people would buy, that prices would be pushed up, and pushed to a point where they would overshoot the equilibrium, till a point when a number of people realize that prices are too high, when they would stop buying, bringing prices down, to a point that they become too low.
Is this reasoning logical? All comments welcome!
Agree cent percent to the reasoning, Atul! Economics is, indeed a game of sentiments. What else could it be, that drives the direction and intensity of billions and trillions of dollars in the market every day?
ReplyDeleteYou just have to think of the right thing and take the right decision at the right time. Most of the times it is the one that everyone is thinking of... More interestingly, on very few instances, it is something that noone else is thinking of - if you can crack that art, you've got the secrets of the trade...
thanks, Akshat! :-) so if i understand you, its about trying to understand what others are thinking?
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