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Managing my investments
Managing my investments

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6.4.2 Groupthink

The final example of group behavioural bias to examine is groupthink, which describes the phenomenon that arises when people are asked to make decisions as part of a group. The primary motivator for decision makers becomes the avoidance of conflict within the group as opposed to voicing their true opinion or helping the group reach the optimum outcome (Janis, 1972).

Groupthink is a behavioural bias that is commonly active within organisations and is not dependent on the impact of external influences. In any meeting or group decision-making task, groupthink has the ability to cause decisions to be inconsistent with, and non-reflective of, the true beliefs of the group members. Such imperfections in decision-making may be particularly damaging when undertaking financial risk management.

Watch the video of the way an investment club, based in the UK, goes about making decisions. You can consider whether the club displays some of the features and risks associated with groupthink.

Download this video clip.Video player: ou_futurelearn_mmi_vid_1161.mp4
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