Investing Together: The Psychology of Collective Investment

Friend groups often share and jointly celebrate motifs. With a particular group of friends, we acknowledge and value the phenomenon of “synchronicity,” which the Cambridge Dictionary defines as “the happening by chance of two or more related or similar events at the same time.”

So, when three different people in a single week told me about Morgan Housel’s "The Psychology of Money," [1] I knew I had to dig into it.

And it was indeed worth it. I enjoyed the storytelling and the side stories and fully agree with his thesis. Essentially, Housel argues that financial success is not just about knowledge or intelligence, it’s about behavior and emotions. As he puts it, “Doing well with money has little to do with how smart you are and a lot to do with how you behave.”

To avoid more spoilers, I want to instead share a subsequent reflection. While Housel delves into the individual side of the psychology of money, I wonder whether there is a collective side to it too. Could community-building be the antidote to the individual fear we all face when making an investment? We know that co-investing reduces risk, but does it also reduce fear?

I would argue that collectivity can, and often does, beat the fear of investing. Here are a few examples.

1. The Power of Co-ops

To start with, consider the cooperative model. From Ugo Pipitone, a former professor of mine, I learned the historical relevance of co-ops, where private individuals jointly invest, own, and operate a business that is beneficial for all of them. Dr. Pipitone referred to the economic miracle of 19th Century Denmark, where private farmers collectively invested in the machines that produced butter, granting them access to the means of production for high added value produce.[2] Individually, buying this machinery would have been financially impossible and unwise. But even if it hadn’t been, it would have probably been a terrifying idea to put all that money into one machine.

Yet, when farmers pooled resources and created cooperatives to buy and manage these assets, the fear was replaced by trust — and trust by progress. This collective model catalyzed Denmark’s economic development, while other countries that relied exclusively on private or collective systems lagged behind.

2. The Public-Private Catalyst

Similarly, joint public and private investments or partnerships can push projects that would be too big for either side alone.

In a country like the United States, which often prides itself on individualism and market-driven solutions, the Port Authority of New York and New Jersey (PANYNJ) stands as a remarkable exception, as Sadek Wahba explains in his book “Build: Investing in America’s infrastructure.” To become successful, the Port Authority brought in public players, including two different states, and private investors, companies and entrepreneurs.

The scale would have been paralyzing for any single institution or individual. But by sharing the risk — financial, political, and probably  emotional too — the partnership unlocked the courage to build it.

3. Divesting Fear in Venture Capital

Finally, in the private sphere, angel networks and syndicates work in a similar direction. They allow individual investors to access deals that would otherwise be beyond their comfort zone.

When you invest through such a vehicle, your decision doesn’t feel like a leap into the unknown, it feels like a collective effort. You will still need a specialized and experienced team to lead the search and the due diligence, but that additional presence of others may convince you that the bet is safe, or has a tolerable risk.

In the world of startups, where uncertainty is the only constant, this collective courage is not just useful, it’s essential. It may motivate investors to open doors that would otherwise remain shut.

Housel rightly observes that “people do crazy things with money.” The individual fear of making a “crazy” decision — of going it alone on a risky venture — can be too much. But perhaps it seems less crazy when others do it with us. 

Sources:

[1] Morgan Housel (2020), The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness

[2] Ugo Pipitone (1990), Agricultura: el eslabón perdido

[3] Sadek Wahba (2024), Build: Investing in America's Infrastructure