Groupthink and the Danger of Cult Stocks

Gamestop was the first obvious manifestation. It was followed closely by crypto tribes, NFT communities, and Discord servers centered on one ticker. It felt communal, energizing, and meaningful...but it has quietly destroyed enormous amounts of capital.

The paradox is that the psychological drivers, like the urge to belong, the desire for friends, or a need to feel part of something bigger, are all perfectly human. They just have no place in capital markets. Markets are already a machine designed to transfer wealth from the emotionally governed to the disciplined. Add a cult dynamic on top of that and you are no longer playing the game; you are the product the game consumes.

Even professionals fall into this. I’ve personally made the same mistake in more “sophisticated” form, joining DM groups with other L/S analysts centered around a single stock. Everyone tells themselves they’re vigilant, but the gravitational pull of affirmation is stronger than people realize. This is less a criticism than a confession: most investors only learn through their own scars.

The First Question: Why Are You Here?

Nothing in this discussion matters unless you first confront motive. If you’re trading for the thrill, for status, for ego, for the dopamine of “called it,” then you are not investing...you’re paying for entertainment. That’s fine if you admit it. But calling gambling “strategy” only guarantees prolonged tuition payments to the market.

Real investing is a solitary sport. Growth comes not from forums but from confronting one’s own P&L in silence, nose pressed to mistakes. Social media accelerates noise, conformity, and impulsivity. It rarely improves judgment. The lesson behind most repeated losses is consistent: conviction must be internally generated.

The Error That Kills: Confirmation Bias Uber Alles

Charlie Munger once wrote that he resisted studying bias until he saw what it was costing him in money. That is the right frame.

The deadliest is confirmation bias: the brain’s automatic sorting of all information to support a prior belief. For any position, there are two categories of thesis killers:

1. X, as in, a risk you anticipated in advance (the pre-mortem category)
2. Y, as in, a risk you never imagined but that arrives anyway

Either one should trigger exit. But cult environments make that impossible. New information is rapidly reframed to defend the group’s existing thesis. Short sellers are painted as villains rather than considered as possible truth-tellers. Every downtick is treated as sabotage rather than signal. When identity fuses to a ticker, thinking is no longer occurring... defense of tribe is.

The Absence of Pre-Mortem = Inevitable Burial

In disciplined investing, you define in advance what would make you liquidate. In cult investing, no such rule can exist. Group allegiance overrides planned objectivity. There are “sacred cows.” Positions become marriage contracts. And in markets, marriage is almost always fatal.

Capitalism is merciless. Mispricings rarely remain for long. If your variant view disappears, or if new information invalidates it, there is only one rational act: exit. Yet the psychological infrastructure of groupthink blocks exactly that. The need to remain “right” in public becomes more powerful than the need to preserve capital.

This is why the most important question in markets is brutally simple:

"Do you want to be right, or do you want to make money?"

You cannot optimize for both. The investor who needs to be right will protect their beliefs. The investor who wants to make money will kill them.

Independence is a Survival Requirement

If you want to last in this game, you must cultivate the opposite of tribal instinct.

1. No sacred cows. Every position is provisional.
2. Itchy trigger finger. Any thesis-killer = immediate exit.
3. Internal conviction only. Never outsource belief.
4. Pre-mortem thinking. Define defeat before the battle starts.
5. Emotional quarantine. Belonging is for life, not for markets.

Crowds are comforting. Solitude is uncomfortable. And that is precisely why solitude is where the real work and the real growth occurs. The market already has more than enough donors. The only antidote is independent thinking.

The cost of getting this wrong is not theoretical. It shows up in your account. The market does not care how big your group is, how righteous your narrative feels, or how violently you reject disconfirming evidence. It only cares whether you can recognize when your edge has expired.

There is always another train coming. The only unforgivable sin is refusing to get off the one that is already on fire.

For more, visit Gregory Blotnick's homepage.