Triumph of the Masses


Spotting trends is the wellspring of wealth. Consider what happened to investors who got into the seven following trends at their start…automobiles, petroleum, TV, telephone, airplane, computers and the internet. Spotting such trends at the beginning is incredibly more important than understanding cycles, knowing market timing, reading balance sheets, picking value investments or risk diversification.

But how do we spot such trends in the beginning. All the ideas above were resisted. The establishment knew that “Man could not go faster than the speed of a horse”…and “If God had wanted man to fly, he would have given us wings”. On the invention of TV: The radio industry knew the idea was a joke.

An article in Time by Lance Morrow entitled “Triumph of the Masses” can help us all understand. This article reviews the book, “The Wisdom of Crowds, Why the Many are Smarter than the Few and How Collective Wisdom Shapes Business, Economies and Societies and Nations”, James Surowiecki.

Morrow begins by telling how at the annual West of England Fat Stock and Poultry Exhibition in the fall of 1906, a British scientist became interested in a weight judging competition. 800 people, smart, dumb, old, young in all types of professions guessed the weight of two dressed oxen. The correct answer was 1,197 pounds. The scientist’s research found that the collective estimate was incredibly close, 1,198 pounds.

The book suggests that there is an uncanny and generally unconscious collective intelligence at work. The book shows how clouds of birds seem to move in one mind but actually are each acting on their own following four simple rules: #1)Stay as close to the center as possible, #2)Stay two body lengths away from your neighbor, #3)Do not bump into another bird and #4:If a predator dives at you get out of the way.

The book suggests that rather than crowds being mindless mobs that the many are weirdly smart and effective even when many of the group are average or below in intelligence or experience.

A key point that the article makes is that there is incredible effectiveness in a diversity of individual intelligences and this is why we are sharing ideas about trends at this site. There are over 3,000 of us reading these messages so perhaps our problem solving ability grows to the 3000th power.

Next time when you see society, mankind or the stock market acting in a way that appears to be dumb, ask why? There may be an intelligence at work that can guide us to the next important trend.

And when you see some group wisdom at work, please share it with me and I’ll make it a point to let all the other readers know so we can all triumph from the masses by spotting trends.

Gary


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