Modern neuroscience is trying to pin down the determinants of the human impulse to tell stories. For example, a team from Emily B. Falk’s neuroscience lab at the Annenberg School at the University of Pennsylvania has used functional magnetic resonance imaging to study the brains of people making decisions whether to share health news stories. The team concluded that people tended to share content that enhances self-related thoughts—that is, information that “engages neural activity in regions related to such processes [self-presentation or mental concept], especially in medial prefrontal cortex,” and that “involves cognitions or forecasts about the mental states of others.”3 In other words, these people are more willing to share their health information in the form of stories about themselves and others.
Paul J. Zak, a neuroeconomist, has shown experimentally that narratives with a “dramatic arc” increase levels of the hormones oxytocin and cortisol in the listener’s bloodstream, as compared with more “flat” narratives.4 These hormones in turn have well-documented effects on behavior. Oxytocin, sometimes called the “love hormone,” plays a role in facilitating relationships. Cortisol, sometimes called the “stress hormone,” has been shown to play a role in regulating blood sugar, assisting memory formation, and reducing inflammation.
Neurological Responses to Stories Evoking Fear
News media and popular discussions have long described financial crises as panics created by a spate of sudden economic failures following a period of excessive complacency about economic risks. It may seem like journalistic hype to use charged words such as panic, which conjures images of a stampeding mob trying to escape a sudden physical danger, and complacency, which suggests a sort of smug stupor. Yet people mostly seem perfectly rational during such financial events, which take place over months and years of largely normal living, and they tend to present themselves as sorting through the facts. Even during a financial “panic,” people seem mostly normal and relaxed, joking and laughing.
But are panic and complacency really so far off the mark? Both words describe mental states that must be supported through neurological structures. We need to study those structures to determine whether there is any common neurology between financial panics and other panics, between financial complacency and other types of complacency.
Consider an example that is current during the writing of this book: the pattern of increasing risk taking by banks as the tenth anniversary of the 2007–9 world financial crisis approached. In 2017, the Federal Deposit Insurance Corporation issued a report expressing concern that US banks, in a reach for yield, were taking excessive risks by extending the maturity of their investments. For nearly ten years after the financial crisis, interest rates had been very low, though higher at longer maturities. Reaching for these higher yields was risky for banks, because if interest rates suddenly increased, they might have to pay more to keep depositors than they earn from the longer-maturity investments, which could cause the banks serious trouble. Ultimately, the banks decided to take the risk, but how did they form their expectations of future interest rates?
No expert has a proven record of forecasting interest rates years into the future. No one can tell a banker how long to wait out a period of low interest rates or guarantee that the low rates will go on forever. All that bankers have are fading memories of narratives of other historical periods when interest rates rose dramatically, leading droves of depositors to run to their banks and withdraw their money. Those stories seem less relevant when interest rates have been low for ten years, but there is no way to quantify how much less relevant.
It may be best to think of bankers’ behavior at such times as driven by primitive neurological patterns, the same patterns of brain structure that have survived millions of years of Darwinian evolution. The fact that dogs and rodents today have some of these same fear-management brain structures is evidence for their common Mesozoic origins. Fear is a normal emotion for all mammals and higher animals, and it is supported by brain structures. The extinction of fear is a process that must take place over time to release the fear after the danger has passed.
Scientists first observed the action of these brain structures indirectly. In 1927, Ivan P. Pavlov, a Russian physiologist, reported his research on dogs. If dogs were repeatedly given a dose of acid on their tongue as a metronome clicked in the background, then later the sound of the metronome alone, without the acid, would induce the same involuntary reactions as if acid had been applied. In a subsequent phase of the experiment, Pavlov repeatedly turned on the metronome but withheld the acid, and the dogs’ aversive reaction was gradually extinguished. Later, the brain structures involved in such reactions were discovered. In rats, the neurons of the lateral amygdala (an almond-shaped area of the brain) play a fundamental role in both the fear-acquisition stage and the fear-extinction phase, increase their firing during fear acquisition, and reduce their firing during extinction of the fear. Not all of the neurons reduce their firing, keeping a residual fear intact. Neuroscientists have concluded:
Collectively, there is much evidence suggesting that a distinct neural circuitry involving interactions between the amygdala, vmPFC [ventromedial prefrontal cortex], and hippocampus underlies the ability to extinguish fear, and that this circuitry is preserved across evolution.5
Rats show much the same circuitry, and involuntary triggering of fear, that humans do. In humans, thickness of the ventromedial prefrontal cortex is correlated with success in fear extinction.6 Some human neurological disorders, such as post-traumatic stress disorder (PTSD), represent failures of extinction, and studying these disorders can reveal the underlying structures of fear management.7 It seems safe to say that the evolutionary process of optimizing the neural circuitry for fear and its extinction has not yet been completed in humans, because civilization is only a few millennia old.
A mental state akin to PTSD may afflict a whole population at times. In his 1951 book The Captive Mind, the Polish poet Czesław Miłosz, describing his impressions of the whispered and unofficial narratives that existed late in the Stalinist regime, noted that the atmosphere of fear created by this regime was profoundly important. The fear was of disappearing at the hands of the secret police, of being forcibly transported with one’s family to Siberia and, once there, starving or freezing to death:
Fear is well known as a cement of societies. In a liberal-capitalist economy fear of lack of money, fear of losing one’s job, fear of slipping down one rung on the social ladder all spurred the individual to greater effort. But what exists in the Imperium is naked fear. In a capitalist city with a population of one hundred thousand people, some ten thousand, let us say, may have been haunted by fear of unemployment. Such fear appeared to them as a personal situation, tragic in view of the indifference and callousness of their environment. But if all one hundred thousand people live in daily fear, they give off a collective aura that hangs over the city like a heavy cloud.8
It is reasonable to suggest, as Miłosz does, that the fear of losing one’s job is less intense than the fear of being deported to Siberia, and that fear at any level relies on the same brain circuitry. Then, in difficult situations with no logical answer or solution—for example, in the decision whether to make a risky investment—the human mind may delegate the decision to some brain circuitry that is similar to rats’. In such cases, memories of bitter past experience, as well as memories of others’ experience transmitted in the form of narratives, may determine the actions taken, and at certain times they may lead to unfortunate economic decisions.
The decline in fear may reflect a gradual process of fear extinction that may be reversed if the narrative experiences a dramatic new development or mutation. Recent narratives about rogue states’ possession of nuclear weapons seem possibly intense enough to renew the fear of nuclear annihilation, but apparently they have not done so. Just as it is difficult or impossible to predict which motion picture will be a box office hit, it is difficult to predict which narrative will eventually have ec
onomic impact.
Narratives Have Been “Going Viral” for Millennia
People have been spinning narratives since time immemorial. Contagion was increased by communications at bazaars, religious festivals and fairs, as well as casual encounters. In ancient Rome, for example, people who wanted the news would attend the regular salutatio at their patron’s home, or they went to the Forum where they listened to orators or a praeco, who wore a special toga to stand out. The praeco announced news and stories to the crowd, read advertisements, and handled auctions. Rumor is the ancient Latin word for contagious narrative.
The polymath David Hume (1711–76) wrote in 1742:
When any causes beget a particular inclination or passion, at a certain time and among a certain people, though many individuals may escape the contagion, and be ruled by passions peculiar to themselves; yet the multitude will certainly be seized by the common affection, and be governed by it in all their actions.9
Hume wrote before the germ theory of disease was established, before bacteria and viruses were identified, but many of his contemporaries understood that both disease and ideas were spread by interpersonal contact.
In 1765, during the economic depression in the American colonies of the United Kingdom following the French and Indian War (Seven Years’ War),10 a letter to the printer in the New-London Gazette (Connecticut) by Alexander Windmill (apparently a pseudonym) identified an epidemic of a narrative that involved the sentence “THERE IS NO MONEY”:
I take it for granted, there is not one of your readers but has heard that most melancholy sentence, repeated times without number, THERE IS NO MONEY: nor scarce one who has not himself frequently joined in this epidemic complaint. Conversation among people of every rank, I have remarked for some months past to run in one invariable channel: and the hackneyed topicks of discourse to be constantly introduced in the same precise order, with admirable uniformity. Benevolent enquiries respecting health, and ingenious observations on the weather, according to the laudable custom of our ancestors, from time immemorial lead the van. As soon as these curious and important articles are discussed; the muscles of the face being previously worked up into a mixt passion of distress and resentment, tempered with a suitable proportion of political sagacity; succeeds the wonderful discovery aforesaid, THERE IS NO MONEY; which is instantly repeated by each party, with every token of astonishment. One would think, by the surprise visible in their countenances, and the vehemence of their expressions, that neither of them had heard of the calamity til that minute, tho’, perhaps, it is not two hours since the same persons conversed upon the same subject and, made the same remark.11
Windmill goes on to calculate (with some exaggeration perhaps) that the sentence THERE IS NO MONEY was then currently being repeated fifty million times a day by English-speaking inhabitants of the American colonies. He thought it reasonable to assume based on his observations that a million people were saying it every twenty minutes during most of the daylight hours, and some were even sleep-talking it.
Charles Mackay drew attention to the contagious spread of “extraordinary popular delusions” in his 1841 book, Memoirs of Extraordinary Popular Delusions. Gustave Le Bon said in his book Psychologie des foules (The Crowd, 1895), “Ideas, sentiments, emotions, and beliefs possess in crowds a contagious power as intense as that of microbes.”12 Related terms are collective consciousness (Durkheim, 1897), collective memory (Halbwachs, 1925), and memes (Dawkins, 1976).
Of Book Jackets and Company Logos
Those who try to create viral narratives experiment, observe their successes and failures, and try to identify patterns that might suggest further avenues for creation. But the difference between a viral narrative and a nonviral narrative may depend on some aspect of the narrative that is not related to our enthusiasm for the narrative. It may depend, for example, on something hard to observe directly, such as the ability to connect with other topics of conversation, or reminders in other narratives.
The contagion rate is often natural, closely related to an event that launched an epidemic, but it is sometimes engineered by marketers. Their engineering may be almost invisible to us because it happens so frequently that we get used to it, and because we find it difficult to imagine all the thought and research that went into the design of marketing campaigns. For example, consider the modern book jacket, the paper cover that publishers place over their hardcover books and that usually includes endorsements, eye-catching fonts, author photos, and colorful artwork. The modern book jacket was invented during the advertising and marketing revolution around the 1920s, replacing some earlier plain-paper book jackets that were there merely to prevent the book from becoming shopworn.
It is important to note that the jacket looks like the work of the publisher, not the author, so it does not make the author look pandering or boastful. Book jackets permitted an immense step-up in contagion rates for books, despite their sometimes vulgar tone. It may be hard to understand the initial public resistance to book jackets at the time of their introduction. The poet Dorothea Lawrence Mann commented in 1921 on this new phenomenon, noting that it prompted many readers to:
asseverate with indignation that far from reading or looking at or being influenced by such a blatant advertising scheme as the book-jacket, they throw it away with the greatest celerity and never, never read a book until its jacket has been safely disposed of and forgotten.13
Despite such buyer resistance, the modern book jacket flourished because it increased contagion. Most people would never have seen the endorsements that were placed on the book jackets, and soon bookstores learned to place the latest book jackets on display in their shop windows to catch the attention of passersby on the sidewalk. The book jacket was a brilliant marketing innovation precisely because readers made the final decision: they could take the jacket off and throw it away, or they might leave it on and place the book on their coffee table, thus passing along its contagion to people who visited. Once it became established that even dignified authors would allow their publishers to cover their books with a glitzy dust jacket, it became a permanent fixture. In fact, publishers who want to survive in a highly competitive business where others use book jackets have had no choice, for the book jacket is part of what George Akerlof and I called a phishing equilibrium. In a competitive market in which competitors manipulate customers, and in which profit margins are competed away to normal levels, no one company can choose not to engage in similar manipulations. If they tried, they might be forced into bankruptcy. A phishing equilibrium with a certain acceptable level of dishonesty in narrative is therefore established.14 Phishing equilibria may not be all that bad. In the case of the book cover, there has developed an art of book jackets that sometimes have significant value.
Another example of marketing-driven contagion is “the news”: the harvest of new information that news publishers hope will grab people’s attention on a given day. “Phools,” as George Akerlof and I call them, who do not think about the marketing efforts, are apt to think that events exogenously give us the news by jumping out at us. But, in fact, the news media are choosing the news because their financial success depends on their stories’ viral impact. A recent example occurred in the United States in 2017 during a total eclipse of the sun that found many people traveling within the country to see the eclipse in its totality. The popular news media were relentless in covering the story, because, no doubt, they recognized its contagion as an experience shared by so many people. Some reporting took on a mystic-patriotic tone, as if God had granted this extremely rare event to the United States. Though the US media frequently used the phrase “once in a lifetime,” they did not mention that another total eclipse of the sun would occur again in the US just seven years later, in 2024. In fact, there was nothing genuinely newsworthy about the 2017 eclipse; eclipses have been studied and understood for centuries.
We also see engineered contagion in company logos on clothing and shoes, especially athletic or work clothing and shoes
. The word logo, meaning a symbol representing a company or product line, dates back only to the 1930s. An example is the Lacoste clothing line, which displays its crocodile logo on its sportswear, casual clothing, and other products. Jean René Lacoste, the company’s founder, was a widely admired tennis star in the 1920s and early 1930s. His nickname was “The Crocodile.” Initial contagion for the clothing line, launched in 1933, benefited from his fame. Today, Lacoste the tennis star is mostly forgotten. Still the memory continues, and the logo persists. Those who do not reflect on the imperatives of marketing may imagine that people wear logo-branded clothing because they want to associate themselves with a prestigious clothing designer. But perhaps logo marketing works because it increases contagion. Customers may absently reach for the logo product because it is familiar and safe, and because so many others are wearing clothes with the same logo.
The construction of narratives by news media, promoters, and marketers can also help lower the forgetting rate. Narratives can be associated with symbols or rituals that remind people of basic elements of the narrative. A symbol can be incorporated into building architecture, letterheads, email messages, and a million other items, and a narrative can be incorporated into regular rituals, such as traditional parades on national holidays. Experts do not fully understand the role of ritual and symbols in aiding memory, but they do understand that they are associated with success.
All these examples illustrate a fundamental error that people tend to make: phools think that the popularity of a story or of a brand is evidence of its quality and deep importance, when in fact it rarely is. On the contrary, growing evidence in recent years has shown that many consumers detest logos and aggressive marketing.15 Narrative contagion is often the result of arbitrary details, such as the frequency of meetings among people (many people see a logo on a shirt) and natural links to other contagious narratives (Lacoste’s onetime fame as a tennis player).
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