Oct

8

Smart Swarms, from Jim Sogi

October 8, 2010 |

The Smart Swarm by Peter Miller analyses crowd decision making by looking at ants, bees, locusts, and then humans. He discusses various heuristics making delayed response decision making difficult. The thermostat game and the beer game are good examples of difficulties in making decisions where the results are delayed. It usually ends up in a boom bust cycle. The cure is to reverse against the trend earlier. Experiments show that decisions made by 3 average persons are better than those made by the smartest person due to diversity of information. This is the Slumdog Millionaire phenomenon where the crowds answer tends to outperform the experts. Analysis of ants and bees show how the swarms make decisions: they simply follow those next to them. The remarkable aspect is how this information travels across large groups almost instantaneously and how this information is more than any of the individuals would have access.

Phase transition is the point at which the entire crowd or swarm behavior changes. Birds, locusts, fish, people in crowds, and even inert molecules can all instantly change phase. Markets seem to as well. Computer modeling requires quantification, and interestingly as Wolfram posited, simple rules create complex behavior and learning that arrive at group solutions which are not preprogrammed in. This differs and improves upon statistical analysis in its adaptability to change and new information. This recalls Wolfram's thesis where simple rules create complex patterns and reverse engineering is hard. Miller looks at the process of reverse engineering crowd decisions. Analysis of crowd stampedes in Mecca show waves in pilgrims backing up before the stampede. Traffic shows similar waves in traffic jams. Analysis of locusts show the rapid change in behavior of the locusts when crowded. One of the beauties of the market is the plethora of data and the platforms to deliver and analyze it. Half the problems the scientists faced was data collection. The question is what are the precursors and triggers to phase change in markets? There is a tipping point to every change in direction, of which there have been many recently. There are precursors, triggers and the phase change. These conditions when identified might give good signals. Pit traders seem to have worked out the dynamic in the pit, but what are the electronic signals? If ants and bees can work this out, can't traders?

Pitt T. Maner III comments:

Now that almost everyone has a smartphone, iPhone, etc, the potential for "super swarms" to develop amongst groups of people seems ever more heightened. One can imagine interesting collaborative efforts forming inside and outside of company boundaries. Swarmanomics. Or in negative cases, mobocracy—mobile vulgus.

It is reminiscent of the bee returning to the hive and doing a little dance to give the direction, distance, and quality of potential food.

One such network is Foursquare, where you can become a virtual "mayor" by being a habitue and boulevardier and a potential director of traffic (or dare say, wallets) to locations. Status and prestige are bestowed to the tireless, individual "worker bee". Where is the party today? Will not "killer" bees and killer apps be soon to follow? Facebook has entered this arena too. Marketing on steroids.

The head of Foursquare states his idea of the future here:

Crowley also offered a glimpse of his vision of Foursquare's long-term future. "In the future, I want Foursquare to be able to tell people where to go wherever they are in the world, based on their previous visiting habits, likes and dislikes and the time of day…We want to be able to push venue suggestions to you. That's what I am pushing towards as we develop Foursquare's tools and how we use our data," he explained.

While the super swarm badge is among the hardest to win, the significance of last night's event is somewhat debatable. There is very little, physically, to show for this achievement. But as social gaming takes off, game mechanics– the idea of giving out tiny rewards to encourage certain behavior– are very much in vogue, with several start-ups and marketing campaigns incorporating check-ins and badges.


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