The anthrax scare in 2001 proved again that group thinking had overwhelmed common sense as widespread fear of anthrax swept the nation. Although one death from anything is too many, a month into the anthrax epidemic, only four people had died and another 14 cases were diagnosed.

Fueled by breathless 24-hour news coverage, everyone seemed at risk. What epidemic? A total of 3,300 Americans died of polio in 1952, since 1981 nearly 440,000 have died from AIDS and the flu epidemic of 1918 and 1919 killed 550,000, about one in every 21 people then alive in the country.

With proper training we would have looked at the situation rationally and could have seen that anthrax was not an epidemic of disease, but of fear. In business, epidemics can cut both ways. The same mass contagion that generates fear can propel products with little intrinsic value to great success. Remember the Hula Hoop, Cabbage Patch Dolls and Beanie Babies?

Current training must point out that the mass media of today and the Internet can intensify the creation of delusions and mass crowd behavior, but they didn’t invent them. A century before the personal computer, Millerites around America were selling their worldly possessions and gathering on hilltops to await an apocalypse.

In 1962, a worker at a North Carolina textile mill reported being bitten by a poisonous insect. Within a week, 62 fellow workers also claimed to have been bitten, and had the rash and nausea to prove it. It was soon revealed that the bug had never existed.

Word of mouth had taken the suggestion and turned it into a truth strong enough to create its own reality. Trained people understand that when it comes to crowd behavior, it doesn’t matter whether the idea is right or wrong. All that matters is that everyone else seems to believe it.

Few areas better illustrate crowd behavior than stock markets. People strongly influenced by the actions of others are the driving forces behind market booms and busts.

At the upper end of a market run, people get carried away in a mindset that Federal Reserve Chairman Alan Greenspan once called “irrational exuberance.”

Then comes the day of reckoning, when irrational exuberance turns to flight, flight to panic, and panic maybe to outright disaster. The more air that has gone into the bubble, the faster it comes rushing out, and the deeper and steeper the markets fall.

Rose Freedman survived the infamous 1911 fire at New York’s Triangle Shirtwaist Company while 150 of her co-workers perished. Her life-saving decision was to avoid following the crowd from the 9th floor down the stairs, which were jammed with people. Instead, she walked up to the top floor, climbed to the roof, and jumped to the next building.

Trained organizations realize that it often pays to go in the opposite direction of the stampede. Group thinking can create opportunity or disaster and recognizing the reality of either is critical for continued success.

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