Cases of Groupthink from History
Civic Review, Vol. 15, Special Issue, 2019, 463–472, 10.24307/psz.2020.0231
The term ‘groupthink’, coined by Irving L. Janis in 1972 is a phenomenon that is one of the worst factors distorting decisions. Groupthink evolves under peculiar antecedent conditions (or pre-requisites) and shows specific symptoms when in action. In this article, these conditions and symptoms are reviewed, examples are given from global history to demonstrate its adverse impacts and the management of the phenomenon is illustrated by positive examples. Then an attempt is made at proving that the rise and fall of foreign currency lending, perhaps the largest economic disaster in post-communist Hungary, can be traced back to the phenomenon called groupthink.
Journal of Economic Literature (JEL) codes: D14, D22, D23, D91, E71, G41
Keywords: corporate governance, diversity, foreign currency lending, groupthink, Hungary, Sanhedrin of Israel
What is groupthink and why do we regard it as a problem?
When it comes to the term ‘groupthink’, virtually every literature essay quotes the recognised works of Irving L. Janis (Janis, 1972; 1982), who coined this word to describe the phenomenon also examined in this article.
According to Janis, members of high-status decision-making groups may develop such extreme forms of camaraderie and solidarity that they suppress dissent, valuing group membership and harmony above else. This silencing of ideas that depart from the majority thinking can have devastating results: it may lead to the distortion of reality, to the adoption of risky policies, and to the abandonment of ethical considerations (Schnall and Greenberg, 2012). Similarly, the Merriam-Web-ster’s dictionary defines this expression as “a pattern of thought characterized by self-deception, forced manufacture of consent, and conformity to group values and ethics” (Bénabou, 2013). Moreover, in the literature the terms “collective denial and wilful blindness”, “Mutually Assured Delusion (MAD)” (Bénabou, 2013) and “collaborative spiralling of irrationality” (Szanto, 2017) also appear as descriptions of groupthink.
As it is obvious from the definitions above, groupthink is a very dangerous phenomenon, which needs to be diagnosed and handled if and when it seems to occur, in order to avoid great problems. In this paper, after describing the accurate general characteristics of group-think, diverse relevant examples are analysed in terms of groupthink, in order to demonstrate the versatility of the phenomenon. The examples are taken from various ages in history: from ancient times to contemporary problems of the 21st century. These examples are divided into two groups, separated by the correct or incorrect handling of groupthink in the given situation.
Antecedent conditions and symptoms of groupthink
As Janis and subsequent researchers have stated, the so-called antecedent conditions are the observable causes of groupthink. In other words, they are the conditions “that produce, elicit, or facilitate the occurrence of the syndrome” (Golkar, 2013).
One primary and several secondary antecedent conditions have been identified. The primary antecedent condition necessary for groupthink is a highly cohesive group. Secondary antecedent conditions can be clustered into two sub-groups. The first sub-group contains those related to the structural or administrative faults of the organisation, namely: 1) insulation of the group; 2) leader preference for certain decisions (in other words, directive leadership); 3) lack of norms requiring methodical procedures; and 4) homogeneity of the members’ social background and ideology. The second sub-group includes conditions related to the decision-making context, including: 1) high stress from external threats with low hope of a better solution than the leader’s; 2) low self-esteem, temporarily induced by the group’s perception of recent failures, excessive difficulties on current decision-making tasks, and moral dilemmas (Gol-kar, 2013).
Here we need to take a quick glance at the accurate meaning of the more important one of the above-listed antecedent conditions. Group cohesiveness can be described as the members’ overall attraction to a particular group, which is a result of the ‘esprit de corps’ (a feeling of pride and shared mutual loyalty) and amiability between the individual group members. Directive leadership is defined as a group member’s perception of being influenced by a leader who pre-meditates a viewpoint early in the decision-making process and ignores procedures for evaluating alternatives. Group insulation refers to the perceived isolation from external opinions in a social decision-making process (i.e. the experience of a strong social homogeneity but less strong ties to society). Stress generally refers to any environmental, social or internal demand which requires and individual to adjust his/her individual patterns of behaviour, and is experienced when important decision outcomes carry a high threat of loss and are perceived to be one’s personal responsibility (Breitsohl et al., 2015).
The observable consequences or symptoms of groupthink are seen as follows: 1) an illusion of invulnerability; 2) an unquestioned belief in the group’s inherent morality; 3) collective efforts to rationalise; 4) stereotyped views of enemy leaders as evil, weak or stupid; 5) self-censorship of deviations from the group consensus; 6) a shared illusion of unanimity; 7) direct pressure on any member who expresses strong arguments against any of the group’s stereotypes; 8) the emergence of self-appointed mind guards to protect or screen the group from adverse information. These eight symptoms are the primary factors suitable for identifying groupthink (Golkar, 2013).
Preventing and handling groupthink
Let us see a few characteristic cases of groupthink in history with focus on how the phenomenon was or could have been prevented and/or handled, and on the possible methods of promoting the efforts to combat them.
How harmful groupthink can be? Negative examples
This part includes cases with adverse outcomes in order to analyse what exactly went wrong, and how it fitted into the framework of groupthink.
As a result of their analyses of wars related to the very existence and the modern history of the USA, certain authors concluded that the pattern of groupthink was observable. In relation to the Independence War, or more exactly, to the British military intervention of 1768, and much later, to the Bay of Pigs fiasco, the Vietnam War and especially to the 2003 Second Gulf War against Iraq, it is rather apparent that groupthink-related factors played a huge role (York, 2011).
Neil L. York compares the mistakes made by King George III and by President George W. Bush in their decisions to use military power instead of peaceful alternatives. York claims that in both instances policy-makers argued that they had virtually no other option. There may have been a certain amount of deceit and disingenuousness in what they claimed publicly, but it also appears that they often meant what they said, and that they acted sincerely, however illogical or ill-informed their actions may now appear to have been (just remember, for instance, the alleged Weapons of Mass Destruction possessed by President Saddam Hussein). Reality is a construct of our brain, a construct we devise: so it was for George III and George W. Bush (York, 2011).
In these cases, the homogeneity of the advisory circles surrounding the two statesmen included people of homogeneous backgrounds and political preferences (in case of President Bush e.g. Dick Cheney, Donald Rumsfeld, etc.), who also filtered the information for the president, thus insulating the ultimate decision-maker.
The May 1996 Mount Everest disaster
On the tragic day of 10 May 1996 two separate expeditions – guided by the New Zealander Rob Hall and the American Scott Fischer, respectively – attempted to reach the summit of Mount Everest, and lost several people. Both teams ignored the normal turnaround time of 14:00 hours, and climbed while a severe storm was approaching. Moreover they did not have enough oxygen in their canisters to do so (Burnette et al., 2011).
Several antecedent conditions of groupthink are well observable in this case. Group cohesion manifested in a rather unorthodox way, because as one of the team members put it: “we were a team in name only”. There was, however a sense of solidarity, friendship and mutual respect within the group, and most importantly, as a superordinate goal, there was the sole purpose of reaching the summit. Thus directive leadership occurred as a consequence of self-censorship to attain the superordinate goal. Stress is apparently related to such extreme mountaineering expeditions, but in this case recent failures added extra stress (Burnette et al., 2011).
The symptoms of groupthink are diagnosable – all in connection with the su-perordinate goal of the groups – such as the overestimation of the group, pressure towards uniformity, and closed-mindedness in the group. All these occurred because of the sole purpose to reach the summit, and distorted the sense of reality of even such experienced mountaineers, costing them the lives of their majority (Burnette et al., 2011).
The ‘Volkthink’ model is a specific advanced form of groupthink, and is defined as the association of certain policies with a cohesive but depersonalised social identity in a way that these policies function as a form of identity preservation or promotion. Consequently, the antecedent conditions are 1) high level of social cohesion and of homogeneity; 2) a strong but depersonalised group identity; and 3) a situational relationship between group identity and specific policies. National identity may be the most obvious example of this pattern (Carolan, 2016).
The special vulnerability of small states, such as Ireland and Iceland, to Volkthink is an interesting idea. Reports of the economic difficulties in both countries reveal similar patterns of excessive interest-group influence, inadequate regulatory capacity, inappropriately close relationships and a dominant social and political consensus, intolerant to op-posing viewpoints. Both countries are of relatively homogeneous population, with smaller monitoring systems and less competitors in the market. In both sectors, the economic success of particular sectors – in this case perhaps most importantly, the banking sector – was positively associated with national and social identity (Carolan, 2016).
Therefore, any criticism of the economic success was understood as a threat to the social identity of the state. It is not surprising that in such an environment, the necessary steps to prevent or, later on, to handle financial disasters could not have been taken, because this attitude had led to a system of dysfunctional public policies. As a consequence, financial bubbles evolved and existed for a prolonged period of time (Carolan, 2016).
Online financial communities
Groupthink theory also has an impact on micro-finances, as revealed by financial online communities. In this case the largest problem is conformity-seeking behaviour within these communities, which is connected to stress, cohesiveness and group insulation, and the lack of information from outside. Stress has a role here, because such online communities have a very strong stress-mitigating effect, but in many cases this effect has an adverse impact on financial decisions. In-group homogeneity and the strong intra-focus of the group lead to cohesiveness and to group insulation. Finally, the lack of statistical support to decisions – due to the absence of external information – may lead to directive leadership, further increasing the adverse impact on individual financial decisions made by the group members. Many disadvantageous financial decisions can be traced back to these phenomena, and their effects were particularly clearly visible during the financial crisis after 2008 (Breitsohl et al., 2015).
Dysfunction of EBA’s stress tests
The European Banking Authority (EBA) is one of the three micro-prudential financial supervisory agencies of the European Union, established after the 2008 crisis in order to enhance control over the financial markets of the EU. One of its main tasks is to conduct stress tests of the market. The failure of the system became apparent when, after the 2011 stress test of Spanish banks, which confirmed that everything was in order, in June 2012 the EU had to bail-out the Spanish banking sector by more than a hundred billion euros. We cannot tell for sure what exactly happened, but most probably a sort of groupthink effect worked, i.e. the national delegates of the EBA Board did not want to vote against a specific country in fear of a possible future retaliation against their own countries in a similar situation, and as a result, they decided in a more “conservative” way (Szegedi, 2018).
How to handle groupthink? Positive examples
Mention must be made of two positive examples when groupthink was prevented and/or handled appropriately. One of them includes the Sanhedrin of ancient Israel, and the practices and processes that may be adopted and built in our contemporary practices. The second one deals with genuine contemporary solutions for corporate governance.
The Sanhedrin of ancient Israel
In ancient Israel, since the period of the Second Temple, the Great Sanhedrin had become the supreme judicial forum, although it also had political functions besides acting as a court. Even after the destruction of the Second Temple in 70 CE, it managed to maintain its position, although with restricted powers (Jany, 2016).
Perhaps the most important case heard by the Great Sanhedrin, the trial of Jesus Christ, was conducted in the period of the Second Temple. One would argue that this procedure would be the best example of the malfunctions of groupthink. However, the crucifixion of Jesus – from the believer’s perspective – was a crucial and inevitable part of God’s Plan of Salvation, and therefore cannot be deemed as adverse, but more importantly, according to the relevant literature, the Great Sanhedrin had very good practices to prevent groupthink, and what happened to Jesus before the court was more of a politically motivated exception.
According to the Talmud the Great Sanhedrin’s leadership system was very effective in preventing a single person’s opinion from dominating others. The leadership was divided between multiple individuals to prevent harmful domineering and giving too much latitude to dissenters. The “Aboth” (“Ethics of the Fathers”) part of the Talmud dictates that “one should hate acting superior” [Aboth 1:10] and also that “judge not alone, for none may judge alone save One [G-d]” [Aboth 4:8]. The essence of impartial leadership is encapsulated in this statement: “Say not ‘Accept my view’ for they are free but not thou” [i.e. “they are free to concur, but not thou to force them to concur”] [Aboth 4:8]. In plain English, the last sentence says that no juror of the Sanhedrin can be forced to concur i.e. agree with the majority (Schnall and Greenberg, 2012).
Besides that, open debates were prompted between the members, and in some cases even the nasi (the president of the court) could be removed in order to prevent directive leadership (see e.g. the story of Hillel [Pesahim 66a] or the debate between the rabbis Yehoshua and Gamliel [Rosh Hashana 25a, Berakoth 27b, Bekoroth, 36a]). Another very important similar instruction was that the junior members had to vote prior to seniors, so that the less powerful and influential could not be influenced by the opinions of the more powerful and influential [Sanhedrin, 32a]. It was explicitly prohibited for a member to refer to the majority vote as the ground of his own vote, and the ‘devil’s advocate’ position was introduced [Sanhedrin 29a]. In capital cases even stronger pre-cautions were made. For instance, if all members supported the conviction, the final decision was mandatorily postponed until the next day [Sanhedrin 40a] (Schnall and Greenberg, 2012).
Even around the trial of Jesus there are signs of this way of thinking, the proofs are recorded in the Holy Bible. Nicodemus seems to provide an example of an in-group member who pursues the exploration of all the effective alternatives from a very rational perspective. Nic-odemus deemed necessary to meet Jesus beforehand [John 3], offered a tentative defence for him during the trial [John 7] and finally helped to bury him [John 19] (Bell, 2016).
Unfortunately, these practices were somehow not transferred to the early Christian communities, where many factions or sub-groups of the church came to existence in a very short time, who did not entirely agree with the mainstream and became rival groups. Paul, who was in many cases very tolerant and benign as a leader, took charge of combating the Judaisers’ views even to the point of confronting Apostle Peter of Antioch [Acts 15:1] (Bell, 2016). This argument absolutely reflects group insulation and cohesiveness along with directive leadership.
What can we learn and adopt from the practices of the Sanhedrin in the 21st century? According to Schnall and Greenberg, especially the “devil’s advocate” and the “second-chance meeting” are relevant for corporate and organizational decision-making, but also the diverse membership of the board can help. (The Sanhedrin also consisted of members with a homogeneous social status and ideological/religious background, but made steps to prevent the failures stemming from this.) It can be a realistic solution if diverse groups (e.g. investors, creditors, etc.) nominated at least a part of the board members (Schnall and Greenberg, 2012). Encouraging diverse options in decision-making – which is in the heart of the Sanhedrin’s practice – is one of the most important means of combating groupthink (Kelman et al., 2017).
Corporate governance without groupthink
There is another type of diversity, preferable for corporate and organizational decision-making boards, namely gender diversity. According to studies, gender diversity can be an antidote to groupthink in several ways. First of all, diversity itself provides more psychological independence than the current system of ‘independent directors’. (This is also true for educational and occupational diversity.) The main advantages of employing female directors has its roots in the fact that as female directors must overcome many system barriers to attain board positions, they tend to be highly motivated and prepared for meetings. Also, female directors typically come from outside the groups and networks most directors come from, and this makes them ‘outsiders’, therefore giving them a different perspective (Kamalnath, 2017).
Another useful tool to combat group-think is the Group Support Systems (GSS), which has been in place for more than two decades. GSS is basically a constantly evolving computer-based technology for teamwork. It structures the group decision-making process in three major ways: 1) focusing on group members’ efforts on the task or problem to be solved by the group; 2) equalising group member participation; and 3) increasing consensus-reaching. Being a technological solution designed for group decision-making, it aggregates the opinions of the group, promotes process structuring, expands the information processing capabilities of the group, and broadens the perspective of the group by facilitating access to external information. Through all these functions, it is able to provide a larger number of alternatives, reduce the time required for making a decision, and increase the use of external information and improve the decision quality (Miranda and Saunders, 1995).
Studies in the field of behavioural operations management increasingly focus on the psychological factors and dynamics that drive operation on the level of the individual worker. They have identified ‘Groupthink Behaviour’ (GTB) as an adverse group behaviour pattern. The relevant studies and the literature have found that the negative impacts of GTB on project work can be counterbalanced by a high level of (individually) perceived internal control and conscientiousness, and to a lesser degree, by a high level of interpersonal evaluation among the group members (Riccobono et al., 2016).
Groupthink and foreign currency loans in Hungary
According to Farkas “a foreign currency loan, regardless of the fact whether it is disbursed and repaid in a foreign currency or [...] in different currency, does not differ from any other loan” (Farkas, 2017). However, foreign currency loans triggered significant changes in the practice of lending in Hungary. The complexity and the absence of transparency of the loan contracts were especially problematic. As Bodnár puts it, “these contracts were rather complicated, and their evaluation required a level of professional banking understanding the judiciary naturally did not have”. And in this quote he refers to that part of the judiciary, which had to try to serve justice in lawsuits related to these loans (Bodnár, 2013).
It started in the early 2000s, when foreign currency loans were authorised, originally only in the case of real estate loans. After 2004, however, the socialist-liberal government made this construction available for home equity loans as well. Interest rates were compelling, and many people wished to take advantage of the foreign currency margin. However, as the global economic crises escalated after 2008, the advantage turned into a disadvantage, and the worth of the instalments became multiplied sums of the original ones. This led to a disaster in many ways (Neményi, 2009). The accumulated worth of the loans reached HUF 15 billion between 2008–2011, and although the new conservative government in power from 2010 introduced many helpful measures to solve the problem, the accumulated worth still remained HUF 4 billion in the summer of 2014 (Bodzási, 2015).
The extensive popularity of foreign currency loans in the years preceding the crisis was due to a sort of groupthink pattern. An empirical study carried out by young researchers on the reasons underlying the spread of the foreign currency loans traces it back to three main factors: 1) the successful aggressive marketing campaigns carried out by credit institu-tions; 2) the lack of basic financial literacy among the population; and 3) that the few warnings about the possible adverse consequences could not get through. (These three factors are, of course, interdependent.) Regarding the first factor, the advertisements of the banks involved – especially the advertisements on television – used a sort of extremely manipu-lative tone and symbols to convince people that these products were the easiest way to receive funding, in comparison to ordinary credit assessment procedures. Regarding the second factor, two other empirical studies should be quoted. The 2010 OECD assessment of financial literacy found that even in comparison to other countries in the CEE-region, the Hungarian population was the most uneducated in this field. The 2011 research carried out by the National Bank of Hungary on financial literacy also had worrying results. Although 67% of the respondents claimed to make regular efforts at understanding finances, other responses revealed that 40% were not absolutely or mostly confident in this field, and only 20% claimed to be completely confident. One seventh of the population did not have experience with any kind of financial product at all, including the simplest bank account. Regarding the third factor, the Hungarian Financial Supervisory Authority – which was then integrated into the Hungarian National Bank in 1st October 2013 – had no power to restrict foreign currency lending. Nevertheless, they warned credit institutions as well as the population, but without much success. Also, a small part of the media published articles with warnings, but these also remained ineffective (Bagány et al., 2015).
Now, the above facts clearly suggest that the antecedent conditions and symptoms of groupthink are in place. The case is also somewhat similar to the negative example of financial online communities mentioned above. Regarding the antecedent conditions: 1) stress stems from the need for funding (of a real estate transaction or any kind of spending); 2) group cohesion and group insulation can be traced back to the part of the population trying to take advantage of a solution they did not really see through or understand in its complexity; and 3) in connection with these, the aggressive marketing campaigns of the credit institutions, along with the peer pressure and the lack of proper warnings to the population, means that the intentions of the banking sector turned into a virtual directive leadership in this case. Many of the symptoms were also found: the unquestioned belief in the group’s inherent morality; the efforts to rationalise (on the basis of the irrational); self-censorship about the possible adverse consequences, and once the problems had escalated, false hopes in some kind of a miraculous redemption; and so on.
To sum it up, in the author’s opinion, the foreign currency lending disaster is an example of groupthink, and perhaps one of the worst ones in modern Hungarian history. It could have been prevented by a more responsible approach of the incumbent government, by a stricter financial regulatory and supervisory system, and most importantly with proper financial education.
Instead of a conclusion
It is relatively difficult to draw a general conclusion or to suggest a general solution for combatting groupthink, since the latter has not been developed yet. What seems to be sure is that the antecedent conditions and symptoms of groupthink are well identifiable in most cases, and this enables decision-makers to take steps to combat groupthink or to mitigate its adverse impacts. Among the possible means, diversity seems to be the most time-honoured solution. Due to the gravity of the problem, further research and studies will likely be conducted on it in the future, and new methods will certainly be devised. However, we should not forget that the simplest but most significant practices have been available since Biblical Times. Another important thing to keep in mind is that governments and competent authorities should always be careful in granting authorisation for loan constructions, because the groupthink effect can manifest itself and lead to grave consequences.