This article originally published in The Northern Daily Leader on 3 September 2011.

Committing life-threatening acts with little protection besides a red scarf and the false invulnerability of a dozen full-strength beers under the belt sounds pretty silly. Yet this is exactly what many young Australians do each year at Pamplona – the scene of an annual experiment to determine what happens when the sharp end of a bull’s horn meets a soft bum. Of course we all know the answer to that one and each year the TV news shows us in graphic detail as the bulls stampede over the hapless runners.

In typical laconic Spanish style, the Pamplona city council’s official website contains this nugget of encouragement for aspiring runners –“Number of injured a year: Between 200 and 300. Only 3% seriously.” There you go, on average only 9 people per year are seriously injured, nothing to worry about. The probability of hosting such an event in Australia? Zero. Clearly the nanny-state, a condition familiar to most Australians, has yet to arrive in Pamplona.

Surprisingly (or unsurprisingly, to regular readers of this column), there are some parallels with the stock market and the chaos in Pamplona. Much like the unfortunate runners at Pamplona who are trampled underfoot by a herd of bulls, investors in the stock market can suffer the same fate. When faced with uncertainty, investors fall prey to herding behaviour, where they simply start copying what everyone else is doing, in the hope that everybody else knows what they’re doing. Reasoning and rational analysis get discarded in a hurry as investors join the rush towards gold, cash, property or tulips – it actually doesn’t matter what it is, if everybody else is doing it, then so am I! Researchers describe these manias as self-organised, in that they are brought about by a combination of uncertainty and mimicry.

So how do you stop yourself from becoming one of the herd, or even worse, being trampled by the herd? The majority of our investment mistakes result from our cognitive and emotional biases, where our emotions get in the way of rationality, so a simple solution is to let someone else make the decisions for you. It’s easier to make rational decisions about someone else’s investments than your own – there’s no emotional attachment to complicate the process. Of course should you find yourself at Pamplona next July, there’s no point being rational when confronted by a real bull – just run like hell.