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Requiem for a Correction

An Introduction to Mass Formation Psychosis 

- By The Notorious CFP®


I re-watched a movie recently, Requiem for a Dream, that came to mind as I contemplated the fate of the country, our economy and financial markets. Because that's what single, lonely, emotionally stunted financial planners do on Friday nights. But also because I remembered how dark, twisted and emotionally disturbing the movie was (and still is to this day.) I would definitely NOT recommend watching the movie yourself unless you already know you enjoy being disturbed. It's Stanley Kubrick levels of weird. If you liked A Clockwork Orange or The Shining, you might be able to digest it. It's the kind of movie that is painful to watch, hard to forget, and unlikely to be watched again.

The movie tells the story of four separate characters affected by drug addiction as it carefully chronicles how it alters their physical and emotional states. Their addictions quickly force them to become incarcerated in distinct and tragic prisons of delusion and desperation. Ultimately, each character deteriorates from their own depravity as their perceived "reality" succumbs to a type of delusion that collapses in on itself, before ending in catastrophe. The Hallmark Channel movie of the week, this is not. The kind of movie you feel like taking a shower afterwards. Regardless, the central theme centers on addiction, not only with substance abuse but also with loneliness and avoidance of reality. 

In some ways, that's the world I perceive many Americans currently inhabit today. We each develop or inherit models of how we think the world does or should work. Some are accurate but most are flawed, many tragically. We then build carefully constructed narratives around this model. We consume social and mainstream media that reinforces our previously-held beliefs, and hang out with people - in the real world and online - that agree with us, while repelling those who do not. And when those models fail to bring us success, happiness or fulfillment- or even self-destruct in on themselves - a form of cognitive dissonance inevitably overwhelms us. 

For the majority of people who lack the critical thinking capacity to review and adjust their beliefs when faced with seemingly irreconcilable contradiction, a form of madness often ensues. It has to, because it's not truth-based and therefore cannot sustain itself. And as that existential contradiction proliferates across multiple demographics and generations, we eventually arrive at America circa 2022. A clown car driven by of fringe degenerates towing a dumpster fire of zombies careening over a cliff. A third of the country insists on driving (or at least riding shotgun) while another third flees to the back-back seat intent on saving themselves. The final third remains transfixed on their smartphones and can't be bothered to look up.

I propose this collective madness is impacting our financial markets in a similar manner to all other aspects of our lives, including politics, relationships, families, work, media and entertainment. But I'm not alone...

We build carefully constructed narratives around this model... And when those models fail to bring us success, happiness or fulfillment- or even self-destruct in on themselves - a form of cognitive dissonance inevitably overwhelms us. For the majority who lack the critical thinking capacity to review and adjust their beliefs when faced with seemingly irreconcilable contradiction, a form of madness ensues.

It Has A Name (That Must Not Be Spoken)

A few psychologists are attempting to frame our current zeitgeist under Mass Formation Psychosis (MFP)a term (recently) made famous on the Joe Rogan Experience podcast with Robert Malone in December 2020 during an episode most enlightened Americans have already watched by now (with more than 100 million views, in a country with only about 150 million functionally literate.)

For those few who are or have not had the pleasure, the episode is available on Spotify and is admittedly quite long. It's a full three hours in total, which will make it unpalatable for most Americans who prefer to be told what they want to hear, are uncomfortable with new conflicting ideas have become conditioned to absorb their information in shorter and more digestible sound bites, online articles and nightly newscasts. But it's definitely worth your time if you can suppress your bias and political ideology. It's probably the most useful content of the past three years. It's aged very, very well.

Unfortunately, in the months following the original airing of this seminal podcast, the concept of MFP became both deeply controversial and divisive, primarily due to it's uncomfortable critique of the queer connection between Big Pharma and the CDC, two entities that are generally favored by the Big Tech companies that control the economy, government and mainstream narrative and the political persuasion that currently control domestic politics. This represents yet  another of many fascinating political shifts (immigration, law enforcement, fascism) between the two main parties in the 21st century.

It can be disorienting for someone old enough to remember when Democrats were proudly anti-immigrant (Bernie Sanders), anti-gay marriage (Barack Obama) and pro-mass incarceration (Joe Biden). I remember the 90's when right wingers like the Koch Brothers were flooding the country with illegal cheap labor, the WASP-religious right (instead of today's state-religious left) were banning books and music, and Hillary Clinton was referring to black men in as "super predators." A lot has changed in thirty years, and roles have now reversed. How easily small minds forget. Or become incensed.

The consequence of our new expanded nexus of government and corporate power is almost total censorship of the topic of MFP from public consumption on the Internet- which has by now almost completely supplanted television, cable and newspaper (so called "analog media") companies in terms of influence, for all but the oldest Americans. So much so that mere mention of MFP is hard to find in an online search, except for mostly critical analysis. It's been completely scrubbed, like a chapter out of Orwell's 1984, and that's not an accident. However, a reasonable and non-political primer video for MFP can be found here for those unfamiliar but interested in the topic.

Without engaging in a deep dive into the topic, Mass Formation Psychosis (MFP) is most easily articulated as a lost grip on reality and essentially represents a group hypnosis commonly referred to as "group think" that emerges in a society when four conditions are met:

  1. Lack of social bond (Isolation)
  2. People experience life as meaningless or senseless (Loss of Purpose trending toward solipsism and nihilism)
  3. Free-floating anxiety and free floating psychological discontent (Stress)
  4. Free floating frustration and aggression (Vilification, victimization and social unrest)

MFP has actually existed as a theory and studied closely for centuries. It builds upon the work of 20th century giants Hannah Arendt, Joost Meerloo, and many others who sought to understand the large scale psychological processes that had driven periods of collective social dysfunction (and the public policy blunders that ensued) such as the Holocaust, the Bay of Pigs fiasco, the US Viet Nam War and most recently the COVID vaccine and lockdown response. 

Today, we leverage MFP to ask: "How could those in power in 2020-21, and those in the Baby Boomer generation that was defined by the Bay of Pigs, Watergate and Viet Nam- sit idly by and condone the faulty group dynamics and dysfunctional decisions which first characterized the “coronavirus taskforce” under Vice President Pence, and then continued in a slightly altered form through the Biden administration?"

In short, MFP is to date the most popular and scientific explanation experts are hypothesizing for why so many people have lost their freakin' minds.

I'm paraphrasing, of course.

The reason I introduce MFP in an economics article is my belief that it represents  the root of why financial markets are in decline this year. If psychology is the concrete foundation of our current economic and market crises, MFP may well represent the rebar. I will expound on MFP's impact on the market in future posts, since the connection could fill an entire book. You're already probably starting to lose interest. For now, it's enough to simply understand that a.) the chaotic, bipolar movements in the stock market may be symptomatic of a much larger trend manifesting in our chaotic society, being managed and perpetuated by a state of collective mental illness, and b.) you heard it here first!

To understand the madness of today's markets, I recently brushed up on the works of Irving Janis, a 20th century social psychologist who is given credit for identifying the concept of groupthink. Building on the MFP pre-requisites above, Janis further observed the following conditions, all prevalent during the past three years in our collective response to COVID and the administration of the vaccines:

  • The group develops an illusion of invulnerability that causes them to be excessively optimistic about the potential outcomes of their actions. 
  • Group members believe in the inherent accuracy of the group’s beliefs or the inherent goodness of the group itself. Such an example can be seen when people make decisions based on patriotism. 
  • The group tends to develop negative or stereotyped views of people not in the group. 
  • The group exerts pressure on people who disagree with the group’s decisions. 
  • The group creates the illusion that everyone agrees with the group by censoring dissenting beliefs. Some members of the group take it upon themselves to become “mindguards” and correct dissenting beliefs.

Does this sound familiar?

Is it possible the mass hypnosis that we as a society (and specifically our governmental and corporate leadership) fell under during our initial response - and subsequent acquiescence- to the COVID virus shares parallels with similar periods in the past where emotions overrode logic and reason?

Is it possible the investment community is reacting in similar fashion to the current economic and market environment?

Could this revelation influence our own investment decisions and behaviors?

For more on groupthink and it's overlap with investing, here is an exceptional primer on the topic that expounds on the topic and highlights the famous eight symptoms of groupthink. WARNING: You may never look at your opinions on the vaccine- or politics- the same ever again!

“Madness is the exception in individuals but the rule in groups.” ~ Fredrich Nietzsche

I'm not trying to be hyperbolic nor provocative, I'm as serious as a heart attack (no pun intended.) You may be wondering what any of this has to do with your investments? The answer is that my conviction is that if investors fail to understand that these modern financial markets now reflect a new age of disorder, the volatility and vicissitudes of daily price movement will be extraordinarily stressful at best, and prevent continued participation at worst. 

Conversely, if one understands this "new normal" (something I have been warning about here for years here and in my client meetings) to actually be a tremendous opportunity for long-term investors, then there is a good chance that they can not only succeed but thrive, as wealth transfers from the reckless and fragile to the patient and anti-fragile. 

“Four things need to exist or need to be in place for [Mass Formation Psychosis] to emerge. The first thing is that there needs to be a lot of socially isolated people, people who experience a lack of social bonds. The second one is that there needs to be a lot of people who experience a lack of sense-making in life. And the third and the fourth conditions are that there needs to be a lot of free-floating anxiety and a lot of free-floating psychological discontent. Meaning, anxiety, and discontent that is not connected to a specific representation. So it needs to be in the mind without the people being able to connect it to something. If you have these four things—lack of social bonds, lack of sense-making, free-floating anxiety, and free-floating psychological discontent—then society is highly at risk for the emergence of mass phenomenon. “ - Mattias Desmet, Professor of psychology and practicing psychoanalytic psychotherapist - Ghent University