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The Last National Bank (1932)
The Depression-era bank that was solvent until a false rumor triggered depositor withdrawals that produced genuine insolvency—Merton's canonical example of the self-fulfilling prophecy, now a template for understanding AI displacement narratives.
Merton's paradigmatic case of the self-fulfilling prophecy: a financially sound bank destroyed not by any underlying weakness but by depositors acting on a false belief. The bank's assets exceeded liabilities, loans were performing, reserves met standards—but a rumor started. Depositors withdrew. The withdrawals convinced others the rumor was true, prompting further withdrawals. The bank, drained of liquidity, failed. The prophecy was false initially but true finally, and the transformation from false to true was produced entirely by the belief itself. Merton used the case to demonstrate that social reality is constituted partly by beliefs about social reality—not as a philosophical claim but as an empirical mechanism observable in bank runs, stock panics, labor disputes, and now in professional communities responding to AI.
In The You On AI Field Guide
The bank run is the clearest possible illustration because the mechanism is visible and the timeline is compressed. The rumor circulates (day one), withdrawals begin (day two), the bank