Blaming BP: The Emotional Organization of Equity Markets
“Blaming BP” examines the psychology of equity shareholders from the perspective of markets as complex social systems; with subsystems functioning under different operating rules. Linking the large group behavior of the “electronic herd” (Friedman, 1999 ) to the psychodynamics of blame ( Fingarette, 1957) I examine the links between the strengths and weaknesses of investor psychology with the opportunities and threats of the equity market as a system in continuous flux of value generation, regression, and regeneration.
We live in an age of volatility: political volatility; environmental volatility; economic volatility. Our awareness of volatility is bathed in a constant flow of information, provided through multiple media on a 24 hour daily news cycle. Often, our reaction is to shut down information—to flee from its intrusiveness. The other response is to engage, attempting to make sense of the information flow. Each response mirrors a familiar defensive posture along a fight-flight continuum as individually, we struggle to gain coherence in a 21st century world moving rapidly between advance, regression, and new advances (Krohn, 2002).
Either way, the experience of avoiding or of attempting to integrate new information, disturbs our normal practices of business as usual. Within our daily organizational participations, we neither avoid information nor allow ourselves to be overwhelmed by it. Rather, we limit our environmental horizons in order to make sense of considerations related to organizational demands through “bounded rationality”, the emptying of our decisional worlds beyond the inputs necessary to get our jobs done. Limiting ourselves to what makes sense within the boundaries of our organizational roles, routines, and tasks, we are also accustomed to viewing organizations as having more or less clear, defining, limits: like the family, the university, or the corporation (Simon, 1977).
Yet, making sense of the informational flux of the 24 hour news cycle requires a broader view of organization. Each of us is required to construct an organized coherence pushing past our involvements in limited organizational subsystems to make sense of larger, complex systems linking psychology, sociology, economics, and politics. For example, the rational behavior of individual financial institutions preceding the recent financial crisis made sense at an individual, organizational level but threatened systemic collapse in the systemic dynamics of (dis) organization (Haldane, 2009).
The same bounded rationality that facilitates our thinking in conventional organizations, limits our view of more complex organizations, required in making sense of the complex dynamics of the informational world in which we live.
References
Fingarette,H. (1957) Blame: Its Motive and Meaning in Everyday Life. Psychoanalytic Review, 44: 193-211
Friedman, T. (1999) The Lexus and the Olive Tree, New York: Farrar, Strauss & Giroux
Haldane, HG (2009) “Rethinking the Financial Network”, Financial Student Association, Amsterdam.
Krohn, HW (2002) Stress and Coping Theories. userpage.fu-berlin.de/~schuez/folien/Krohne_Stress.pdf
Simon,H. (1997) Administrative Behavior, 4th Ed. New York: Free Press
