FROM THE editors August 23, 2004 Issue

Think for yourself

Editor

Remember the wild dot.com boom during the late 1990s—and its explosive, crashing bust a few years later? Or the once-unimaginable slide of the mighty Japanese economy that took financial markets around the globe by surprise? What drove these events—both their rise and fall?

In the case of the dot.com boom, investors became caught up in the flurry of inflated value placed in companies that existed mostly on paper. And when those companies dissolved, a stampede took place in people's thinking with a massive shift from high expectations to deflation and, for many, heavy losses.

These events might seem unrelated to most of us. But they provide cogent examples of how groupthink—contagious group thinking—can drive employment rates, real estate prices, and consumer debt.

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