Investors as Insects

How many brilliant investing insights can we glean from watching the behavior of ants, bees and other “social” instincts? How many similarities can be seen between a hive of bee activity and a huddle of investors? A column of ants marching forth and a mob of traders pursuing a trend?

Wall Street Journal:

Social insects excel at what we’ve come to call the “wisdom of the crowd,” in which a group of moderately informed individuals is more accurate than a lone “expert.” Suppose two bees each discover a different food source. As research beginning almost a century ago has shown, each bee then returns to the hive and “dances,” communicating the direction and distance of the food; when a bee in the hive encounters a dancer, she investigates that source. How does the hive figure out which is the better resource?

Suppose site B has twice the food as site A, and as a result, the scout from that source dances for twice as long. The other bees in the hive will encounter the site B scout dancer twice as often as the other bee; soon, twice as many bees investigate and return from site B as from site A, and they dance for twice as long, too. This results in four times as many bees checking out B than A, then eight times as many, then…everyone. No bee investigates both sites, yet the better site is chosen.

Read the rest from Robert Sapolsky at the link below:

Bees and Ants on How to Make Decisions (Wall Street Journal)