Sometimes crowds aren't wise

I like Surowiecki's book, a lot, and I have experienced many instances where the collective judgment of a group was far better than even an informed individual. But the "wisdom of crowds" catchphrase is dangerous--oftentimes crowds are not wise at all.

We are experiencing right now an era in which crowds are really dumb. I'm referring to the financial markets and the related economic recession. The financial markets and news affecting the financial markets have merged into a massive echo chamber, wherein bad news begets pessimism which keeps prices down which begets another cycle of bad news.

We've seen this in reverse, of course. Do you remember 1998-1999, during which time everyone was watching CNBC or checking Yahoo Finance all day long, in real time assessing the value of their stock portfolios? Oversubscribed IPOs begat good news, which kept prices high, which begat more buying, etc., until it all came crashing down.

I thought it was clear to everyone that market groupthink, which afflicts us in good times and bad, obscured the true value of securities, and therefore paying close attention to news items in order to make sense of the markets and our economy was, at best, a waste of time.

But no. Felix Salmon, in his Portfolio Market Movers blog, points to a Financial Times article introducing us to a service from Reuters that collects news items and alerts traders when news trends indicate potential market movements.

In other words, lean into the echo chamber, and listen real hard for signals you can use to make decisions. Um, it's only January, but I will bet there's not a stupider product idea introduced for the rest of 2009.

Google works in mysterious ways

The traffic on this site spiked yesterday--up about four-fold from the average of the rest of the week. Why? Blame Google Images.

Last November I posted on why the characters on "Lost" were like the management of a dysfunctional company. To illustrate the post, I found (on Google Images, of course) a promotional picture that had been used by a South Korean television network. I pasted it into the post, and that was that.

After the first of the year, when new episodes of "Lost" began again, I started seeing traffic spikes from time to time based on people searching for "Lost" images on Google.

And yesterday, it happened again. I went to Google Images, typed "Lost." And saw my blog post as the #1 result. (Why my picture instead of the original from South Korea? Or any other picture, for that matter?) People from Turkey, the UK, the US, Japan, Saudi Arabia, Canada, Austria and many others, all checking out that picture.

Some even spent time reading the content.

The internet can be a really random place sometimes.

(Of course, I couldn't resist posting the picture again.)

UPDATE: April 15. Traffic is back to normal. Ran the Google Images search again. My post is nowhere to be found...

Google, internet, images, algorithms