Trader Mike

I’m sure most of you already know about, and probably have read Extraordinary Popular Delusions & the Madness of Crowds. Well there’s a new book, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, that takes a different angle on group-think.

It’s interesting to juxtapose the ideas in these two books. This is just like the argument between trend following traders, who join the crowd, and contrarians who try to buck the crowd. As I’ve written before: the crowd may be stupid but it’s stronger than you. But there’s also lots of money to be made by fading the crowd if your timing is right. I may have to add this book to my reading list, although after reading the reviews at Amazon I’ll probably flip through it first. Since the author is a financial writer I’d like to see how he relates his findings to the market.

Dave Pollard has a write-up about the book on his weblog.

Edit to add: Here’s a snippet of an essay Surowiecki wrote in the June 2004 issue of Wired (via ‘To Talk of Many Things‘):

The Big Picture highlights what Mark Cuban has to say about how stocks are valued. (Cuban’s entire statement is here ) Mark is absolutely right that supply and demand, and the mood of the crowd (psychology) matter much more than all that fundamental mumbo jumbo. Especially in the short term.