The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

Flash Mobs

Bill Wasik, now an editor at Wired magazine, is often credited with organizing the first flash mob. In June 2003, he sent an e-mail that ultimately reached about 200 people. Everyone was invited to meet in the rug department at Macy’s in New York City. When asked by the salesmen if they needed assistance, they each said that they lived on a commune and were looking for a love rug. Another time Wasik got 500 people to meet by a giant animatronic T-Rex dinosaur at the Toys “R” Us in Times Square, New York City. At an agreed upon time, in unison, the mob rushed the T-Rex, fell to their knees, and began screaming and waving their hands.4

Does something similar happen in the stock market? Absolutely. Swap out rugs and dinosaurs for stocks or indexes or rumors or seasonal trends and you have focus for a financial flash mob. The mob is the crowd on Wall Street. Can the crowd move the market or stocks? Absolutely. Is the mob powerful enough to move the Dow Jones Industrial Average or the Standard & Poor’s 500 Index higher for an entire month? Maybe.

Flash mobs are powered by social networks. And Wall Street, in its own way, is filled with social networks linked together by instant messaging networks, and e-mail DLs—or distribution lists. These networks are used by banks, strategists, and others to send research and strategy notes to like-minded investors, who in turn often forward the notes to clients or colleagues. The communiqués are often spread from one group to the next. ...