The Wisdom of the Crowd
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Politics and Activism

The Wisdom of the Crowd

koyn, the app is coming soon!

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The Wisdom of the Crowd

"The Wisdom of the Crowd?"

I attended an investment conference one time and listened to a panel of professional investors. The highest profile member of the panel asserted that a certain investment area was horrible. A person in the audience said, "I do not agree." The person who made the negative prediction, a famous investor, shouted, "Good! If everybody agreed with me, I would know I am wrong".

This comment brings up the question in investing regarding "the wisdom of the crowd". Is it better to stand against the crowd? Or is it better to go with the crowd, follow the trend?

Given recent events around GameStop and other such internet hyped stocks, I think we can conclude that the power of the crowd is strong in investment markets. The internet has supercharged the crowd's view. Previously, ideas did not travel fast. The speed of information dissemination has become a significant factor in equity market investing. In a time of fast information dissemination, the "trend is your friend".

But this does not address the wisdom of the crowd.

As a professional investor, I value more information than less. If I could get a read on how the crowd was viewing something, it would be invaluable. It would not matter if the people opining on the investment buy it or not. It is their opinions that are crucial to assessing the investment, for their opinions holistically define sentiment, their opinions represent data points. If an idea gets the support of a large group, we can assume more people will latch on to it at some time. If more people buy into an idea, the investment goes up. The crowd can catalyze momentum in an investment, a powerful force.

Many professional investors belittle the crowd, the status quo. The crowd quite often feeds off intuition, and many "snooty" investors dismiss intuition. I do not. Some of the best calls in investing have been done on a "hunch" or intuition. I know professional investors who invest solely based on what other people say. They buy the hype and only later come up with a fundamental rationale for the investment. Every investor, professional or not, uses intuition at some point.

So, if a professional investor can buy an idea without doing thorough research, buy on intuition, why can't a normal person? If professional investors can act on another party's recommendation, private investors can too. In both cases, intuition is key.

In the end, investors must strive to assess as much information as possible, both fundamental and sentiment. Thus, investors will benefit if a way can be found to gauge the sentiment of a large cohort — the crowd. When I say sentiment, I do not mean the confirmation biased echo chambers created by companies like Reddit. I mean two-sided opinions. In investing there is always another side and it must be acknowledged.

We need a solution that provides both sides (views) of an investment gathered from the widest group of people possible. Not only will such a two-sided debate help inform better investment decisions, it also has the potential to lower market volatility as opposing views may be expressed, thereby disallowing extreme market movements on a piece of security based on self-reinforcing, unchecked confirmation biases within an echo chamber. Almost always, these volatile episodes end terribly for everyone involved and expose gaps in the market structure.

There is a solution: koyn. koyn presents an opinion and solicits a binary palette of choices, such as "Agree" or "Disagree" and then inspires dialogue. With koyn an investor can state an opinion on any stock, even GameStop, and they will get a fast read on opposing viewpoints . Instead of barreling into something with the rest of the Reddit crowd an investor will be made aware of the other side. By knowing the other side, by knowing what the crowd thinks, by understanding how many people are on the other side, a better decision can be made.

The statement, "If everybody agrees with me, I know I am wrong" may be true. But the only way we can prove or disprove it is by representing as much sentiment as possible. koyn comes close to doing just that, closer than all the other conventional platforms.

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This article has not been reviewed by Odyssey HQ and solely reflects the ideas and opinions of the creator.
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