Converse to make informed decisions

Nima Abu Wardeh looks into effects of the Bloomberg outage last week.

Illustration by Gary Clement for The National

"We went 'old school' and picked up the phone."
This is how one trader from BNP Paribas described what he, and many others, resorted to as a result of the Bloomberg outage that happened a few days ago. Desperate times and all that. Joking aside though, this was serious.
In case you missed it, on Friday, April 17 traders were left twiddling their thumbs as they stared at blank screens where there should have been financial analytics, stock charts and news staring back. Traders are so plugged into these terminals that they were unable to carry out transactions during the outage.
They didn't have the ability to communicate or execute trades between each other. The effect was immediate and immense: the UK postponed a debt auction and market volumes were down.
Relying so much on one provider is remarkable in this age of heavy regulation and compliance. It has "risk" stamped all over it. Just goes to show how the obvious can go unnoticed and unchallenged. It reminds me of the time a key person at a mega- corporation I was working with on crisis management strategy confidently told me that, should there be a disaster such as a fire or similar, they would convey information - internally, and externally to, for example, the press - via the phone. Er, lines would in all likelihood be down. But that's another story. So too is the issue of the Bloomberg outage.
What I'm interested in is how the way we share information affects our financial decision- making. In the case of traders, it turns out that the most "valuable" part of the Bloomberg set-up is the chat option - its messaging service. Not the charts or trading info, but good old- fashioned sharing information, reaching out to each other, and all things basic and human.
Reaching out to peers is what we do. And social media is key. Without Bloom-chat to connect, Twitter was the chosen venting platform for those affected by the outage. But social media also has other uses in financial circles, for example it is a medium of choice for institutional investors going about due diligence.
Just last week a survey revealed that 80 per cent of 256 such investors questioned in the US, Europe and Asia use social media as part of their toolkit. About 30 per cent of them stated that their decisions have been influenced by what they see on social media.
And it's not just big corporations that do this. We, the people, increasingly plug into social media to compare information, share experiences and just check things out before we make investment decisions. Out with the notion of a lone trader, hunched in front of mega-screens blaring out all manner of number soup. In with cyber tribes and tribal gurus on social trading platforms like ZuluTrade and Ayondo. But be warned, according to research by the MIT media lab over the past couple of years, to perform best we must not be sucked into any one tribe. Instead, the best returns happen when we connect with diverse groups. "Social traders" who interact with a wide range of social media groups, swap information and copy the behaviour of their gurus - several gurus - had the best returns.
This is very different to the traditional take on crowd psychology and sentiment affecting investor behaviour and financial returns - where we're told not to have a herd mentality or we risk losing our shirt.
So the message is this: whether it's the old-fashioned way of getting on the phone, new age flocking to social media, or a simple face-to-face chat, make sure you're exploring and exchanging information and ideas - not getting trapped in an echo chamber.
Nima Abu Wardeh is the founder of the personal finance website cashy.me. You can reach her at [e-mail]