Groupthink in a Family Trust

This is a concept application paper of the term groupthink as applied to the decision making process of a family trust. The paper is broken into to three major parts. First section of the paper is to explain the concept of groupthink, what it is defined to be. The second part of the paper is an analysis of my personal experience with groupthink within a family trust. The third part of the paper proposes a remedy other than argument and debate which would act as a “group antihistamine” against this phenomenon called groupthink.
Defining Groupthink
Groupthink as defined by Irving Janis in his book entitled Victims of Groupthink, in it is stated to be “the tendency of a group to conform to ideas simply because the general sense of the group has moved in a particular direction and members of the group feel committed to continue in the same unchallenged line of thought.” Consequently it is the practice of thinking and making decisions in a group in a way that discourages creativity or individual responsibility.
Groupthink is an occurrence where by a group comes to a unanimous decision about a possible action despite the existence of facts that points to another more fruitful corrective course of action. In groupthink the members of the group place emphasis on everyone agreeing therefore there is a threat when a member is not in consensus. Unfortunately it results in more optimum solutions not being fully considered because of intimidation tactics employed on those who don’t comply. Ultimately members can be ostracized from the group if they are noncompliant to the group’s unified position.
The result is unvetted decisions with poor unwanted consequences. Groupthink will occur more often where there is a strong sense of “we” in the group. In this situation people want to be on good terms with the group so it is not uncommon for a group member to self-censor their own well founded and thorough thinking process to maintain harmony with the group. Groupthink is likely to happen when there is a strong persuasive leader group leader, a high level of group cohesion and intense pressure from the outside to make a good decision.
There are eight symptoms to look for to diagnose groupthink. The diagram on the next page will help the reader to visualize these symptoms that are defined below. The first two symptoms are manifested where there is an overriding blind confidence in the group’s power. 1. Illusions of invulnerability: Here the group displays excessive optimism and underestimates the risks associated with a decision. Members are filled with too much hubris and arrogant thinking, assuming anything they do will turn out successful since they made so many other good decisions in the past. 2. Collective Rationalization: This symptom is manifested when group members rationalize thoughts or suggestions which may challenge what the consensus of the group’s thinking. They superimpose shallow reasons why they think dissenting members don’t agree and thereby sidestep even their own conscience to proceed with their original groupthink decision.
The second pair of symptoms reflects the limited vision and lack of mental acuity that the members labor under to even perceive possible a problem. 3. Belief in inherent morality of the group: This is the belief that whatever the group does it will be right, “after all we are all good people and know the difference between right and wrong.” This causes members to overlook the consequences of what they decide. 4. Out Group Stereotypes: Intolerance, here the group believes that those who disagree are opposed to the group’s purpose. The groupthink members stereotype dissenting members as being incapable of making the right decision or as being morally weak and evil.
The final four are all symptoms of strong compliance pressure being placed from within the group. 5. Direct Pressure on Dissenters: Here the groupthink members (majority members) directly threaten the dissenting member(s) who question the decisions by telling them that they should consider leaving the group if they can’t or won’t agree with the majority. 6. Self-Censorship: Persons that have doubts engage in self-censorship where they believe that if they are in disagreement then obviously they are one who is wrong. 7. Illusions of Unanimity: Silence of an option or things left unsaid is considered to be acceptance of the majority’s decision. 8. Self-Appointed Mind Guards: These are members of the group who take it upon themselves to discourage alternative ideas from being expressed in the group.
To avoid groupthink it is important to have a process in place for checking the fundamental assumptions behind important decisions, for validating the decision making process and evaluating the risks involved in any momentous decision. Before I discuss remedies to groupthink I would like to give my personal encounter with groupthink.

Example of Groupthink
In the second part of this paper I give a personal example of groupthink experienced within a small family trust. This particular family trust is headed by a trusty with a strong personality and 23-year professional career as a financial planner. The Beneficiaries of the trust can’t receive their prorated benefit from the trust until after the Trusty is deceased. In the meantime the Trusty is able to receive all the revenue earned from the trust assets. Trusty depends on this additional revenue to subsidize his retirement because the social security benefits and other savings can’t support the Trusty’s nice but not extravagant lifestyle.
The problem is the Trusty’s financial planning work experience ended more than 12-years ago, prior of today’s global financial crisis and the insolvency of the United States of American. The United States recently topped $18 Trillion in national debt not counting unfunded liabilities of $205 Trillion which is defined as the amount by which future payment obligations exceed the present value of the funds available to pay them.
A second paramount issue is an inability to discern between different schools of economic thought. Today economic and financial groupthink is seen in spades in all the large economies in the Western world which include United States, Europe, Japan, Candida, Australia, and New Zealand. These nations and most others are influenced from a philosophy called Keynesian economics fathered by John Maynard Keynes born in 1883 and died in 1946. This school of thought revolves around keeping people and institutions spending to keep the economy moving. However when there is a threat of an economic down turn most people curtail their spending and start to save trying to prepare for the downturn; therefore the government has to increase its spending to pick up the slack in consuming spending in order to stimulate the economy.
The antithesis of Keynesian philosophy is the Austrian school of economics which is based on the principle of productivity, the philosophy was founded in Austria in the 19th Century. An Austrian would say the way to stimulate the economy is to produce more with what you have. The Austrian school of thought believes that bureaucracy kills productivity, but Keynesians believe the solution is for the government to increase spending which as a result creates more government debt.
So which philosophy do you want to manage your bank account? If you had a huge debt and the interest repayments were killing your finances would you borrow more and then spend it? Or would you find ways to produce more with what you have to pay-off the debt?
Unfortunately the Keynesian groupthink philosophy is prevalent in the Federal Reserve and all the other central banks of the world. The universities, commentators on financial news networks, politicians, including financial planners, stock brokers and wealth managers have been school under the model of Keynesian economics. It doesn’t matter if you have a genesis IQ if you are working from the wrong model. Groupthink has tremendous sway over is members because we are being led by charismatic, influential leaders that are schooled under the wrong financial model of Keynesian economics therefore both Democratic and Republicans can’t see through it because they are forced to comply or be a social outcast because of groupthink.
In my personal example the Trusty of this family trust is a caring, responsible, intelligent and well-read person but the philosophy he is constantly reinforcing his thinking with is Keynesian mindset even though he is a very strong republican. He really doesn’t understand that the markets are all manipulated by government intervention and the central banks, there is no true laissez faire markets. Interest rates are artificially low so there is really no true price discovery of what an asset is really worth. As a results the family trust is invested in very risky financial assets. There is no sure foundation to work from to even bring the truth. The Keynesian school of thought doesn’t make a distinction between, legal tender, fiat currency and money. The groupthink of today is that the US Dollar is money, but it is not, it is an unbacked fiat currency. The dollar is forced upon its citizens by legal tender laws which enforces coins and bank notes must be accepted for payment of a debt or obligation.
Money is actually silver and gold as defined through a five thousand year history. But John Maynard Keynes stated in 1924 that “the gold was a barbarous relic.” Because MR Keynes was successful in gaining a large following, most of the economic decisions were based on his school of thought. The result is groupthink has fooled a successful retired financial planner who is trying to act responsibly as a Trusty but he and his advisors are walking down the wrong road.
What is the Remedy for Groupthink?
For 2,400 years we have been using argument as a way of discussing and exploring a subject, but it is actually very primitive way to find good solutions. Argument is mainly attacking and is negative with no constructive effort or design effort.
There is an alternative to the use of argument in defeating groupthink where anyone and everyone is thinking in parallel and constructively. It is called the Six Thinking Hats.
The Six Thinking Hats
The six hats are a symbol of a mode or direction of thinking. Instead of attacking and point scoring a sensitive and important subject can be opened up and explored with a new mode of thinking which will lift the burden of deception the members have experienced in groupthink. The key is to get into an aligned parallel thinking mode so that everyone is thinking in the same direction but then to understand that the direction can and will change over time.
The white hat is for informational gathering and putting all the facts out on the table.

The red hat is used to find your feelings, your gut reactions, your emotions and what you think others may feel about your decision.

The black hat is the critical thinking, reasoning and the analytical process used to arrive at a decision.

The yellow hat is the optimistic point of view, allows you to see all the benefits.

The green hat is the creativity, freewheeling, brainstorming of ideas without scrutiny.

The blue hat is the organizing and managing used in monitoring and discussing what is the next step.

There is not just one remedy for groupthink, but the six thinking hats will provide a mode or direction in thinking which cures the groupthink disease and the eight symptoms that accompany groupthink acting as a sort of “groupthink antihistamine.”
In my personal example cited the result of using the six thinking hats could be that the Trusty and the Beneficiaries of the trust are successful in finding a safe haven financial investment which the groupthink philosophy is preventing them from seeing. Financial planners with a Keynesian mindset mistake risky financial instruments such as US Treasury Bonds as safe because all the pundits suggest we are on the right track in the United States and the economy is strong and growing. This is not a time for blind over confidence propagated by the groupthink of Keynesian economics. We are about to enter into the most difficult financial times that will overshadow the great depression. This is the time one should be able understand and explain the distinctions between fiat currency, legal tender and money.
Wealth is never destroyed it is only redistributed to those who are properly positioned. The six thinking hats is a tool to help a person breakout of the constraining mold that holds your creativity at ransom.