Lollapalooza Tendency
The tendency for multiple psychological biases and tendencies to combine and interact, producing extreme, often irrational outcomes far beyond what any single tendency would cause.
THE IDEA
LOLLAPALOOZA TENDENCY
An investment decision in the common stock of a company frequently involves a whole lot of factors interacting … the one thing that causes the most trouble is when you combine a bunch of these together, you get this lollapalooza effect.
—Charlie Munger
This tendency was not in any of the psychology texts I once examined, at least in any coherent fashion, yet it dominates life. It accounts for the extreme result in the Milgram experiment and the extreme success of some cults that have stumbled through practice evolution into bringing pressure from many psychological tendencies to bear at the same time on conversion targets. The targets vary in susceptibility, like the dogs Pavlov worked with in his old age, but some of the minds that are targeted simply snap into zombiedom under cult pressure. Indeed, that is one cult’s name for the conversion phenomenon: snapping.
What are we to make of the extreme ignorance of the psychology textbook writers of yesteryear? How could anyone who had taken a freshman course in physics or chemistry not be driven to consider, above all, how psychological tendencies combine and with what effects? Why would anyone think his study of psychology was adequate without his having endured the complexity involved in dealing with intertwined psychological tendencies? What could be more ironic than professors using oversimplified notions while studying bad cognitive effects grounded in the mind’s tendency to use oversimplified algorithms?
I will make a few tentative suggestions. Maybe many of the long-dead professors wanted to create a whole science from one narrow type of repeatable psychology experiment that was conductible in a university setting and that aimed at one psychological tendency at a time. If so, these early psychology professors made a massive error in so restricting their approach to their subject. It would be like physics ignoring astrophysics because it couldn’t happen in a physics lab, plus all compound effects. What psychological tendencies could account for early psychology professors adopting an over-restricted approach to their own subject matter? One candidate would be Availability-Misweighing Tendency grounded in a preference for easy-to-control data. And then the restrictions would eventually create an extreme case of man with a hammer tendency. Another candidate might be Envy/jealousy Tendency through which early psychology professors displayed some weird form of envy of a physics that was misunderstood. And this possibility tends to demonstrate that leaving envy/jealousy out of academic psychology was never a good idea. I now quit claim of all these historical mysteries to my betters.
When to use it
Detecting stock market bubbles: Look for a confluence of indicators like high trading volume, widespread media hype, and rising leverage, which together signal a lollapalooza-driven mania.
Evaluating corporate culture: When diagnosing a toxic or successful culture, assess how multiple psychological incentives (rewards, punishments, social norms) interact to produce extreme outcomes.
Designing persuasive messaging: Combining multiple influence principles (scarcity, social proof, authority) can greatly increase conversion rates, but should be used ethically.
Avoiding bad negotiations: Be aware that a negotiation setting may activate authority, liking, reciprocity, and commitment biases simultaneously, pushing you to agree to unfavorable terms.
FROM THEORY TO EVERYDAY LIFE
In practice
Milgram's Obedience Experiment
Munger interprets the Milgram experiment as an example of interacting psychological pressures. Authority, escalating commitment and consistency are possible parts of that interpretation; this excerpt does not separate or measure their individual contributions.
Cult Conversion (Snapping)
Cults often achieve rapid conversion by simultaneously leveraging social proof, authority, commitment, and isolation, causing susceptible individuals to 'snap' into a new belief system.
Stock Market Bubble
During a speculative bubble, herd behavior, over-optimism, confirmation bias, and the sunk cost fallacy combine, leading investors to drive prices far beyond intrinsic value.
A MOMENT TO REFLECT
Put it to work.
Can you recall a time when multiple psychological biases might have combined to influence your decision? How could you have mitigated their effect?
How might the Lollapalooza Tendency be operating in current marketing, political campaigns, or social movements you observe?
In investing, how can you build safeguards to counteract the lollapalooza effect when making high-stakes decisions?
CONTINUE THE CONVERSATION
Source texts
- Wisdom Theory 100 Mental Models (2020) (Wisdom Theory)