When Social Proof Fails

Social proof is genuinely useful most of the time. If a hundred people avoid a restaurant, there is probably a reason — other people's experience saves you from countless bad decisions.

The trouble starts when social proof replaces your own thinking. During the 2008 housing bubble, millions bought homes they could not afford because everyone else was buying. Your neighbors, your bank, and the media all agreed that prices only go up. The signal was unanimous — and catastrophically wrong.