FINDING THE WISDOM OF CROWDS—ONE PERSON AT A TIME. Jonah Lehrer reports here at his blog (The Frontal Cortex) and also in the Wall Street Journal (March 19-20) on a paper by scientists at Northwestern University which analyzed instant messages sent by day traders. They found that the average trader in their sample of 66 traders engaged in 16 instant message conversations at a time. The 66 traders sent over two million messages over an 18 month period. One way of looking at this is that the traders are trying to take advantage of the wisdom of crowds, but not by taking an average, as in the examples from James Surowiecki that I posted on here. Instead they are continually surveying as many individuals as they can.
These traders made money on average on only 55% of their trades, which is consistent with what I have heard from serious sports gamblers who seem to use 52% as a target for successful betting.