Moody's Tweets

When I lived on the north side of Chicago, I didn't have to turn on the TV or the radio to find out how the Cubs were doing in their games. All around me the city roared and booed in response to every play, and I couldn't have ignored it if I tried. More recently here in Salt Lake City, I noticed that everyone I ran into on one specific Wednesday last month was in a really good mood. I suspect the cause may have had to do with the U2 concert the night before, where thousands upon thousands of happy fans finally got to see their idols in the flesh. Whole cities do experience group moods; anxiety when the weather is changeable or windy, depression when it's dark and smoggy for a long time, and happiness when it's sunny. A local disaster can ruin everyone's day, and even a single fender-bender on the freeway at rush hour can cause a domino-effect of lateness and grouchiness for hundreds of people that ripples outwards as they subsequently interact with their families and coworkers. This kind of stinky karma, by the way, is the best reason ever to be an attentive and conscientious driver!

As in cities, so in the country at large. Remember 9/11? Who wasn't freaked out? How about the Deepwater Horizon oil spill? That put a damper on the whole summer last year. We share our emotions, and now that the Internet lets us connect instantaneously over long distances, we share them to an even larger effect. This has not remained unnoticed by economists, and also by certain data-mining companies who keep track of the financial markets.

An average of three days after the Twittersphere indicated a spike in anxiety, share prices across many indices consistently took a dive. Flighty investors were reacting to their emotions. Conversely, when tweeters in general were happy, share prices rose. Economics is the universal human language, and it has proven as horrifically complex to forecast as the weather. Are we finally seeing a quantifiable illustration of the way in which the weather (among other things) directly influences the economy? What happens to us when common financial forecasting algorithms are all based off reading mass human emotion? Well, for one, you can say goodbye to that three day lead time they noticed in the 2008 data. For another, you then open the possibility for, say, a single nationwide blizzard causing a computer-entrained investor panic that persists for much longer than it might have, as low share prices fuel anxiety that loops out into the social networking sites and then back into the financial algorithms. The question arises: Who's running this junk show? Us, the computers, or the weather? What might happen if unscrupulous people try to run the system in reverse?

But seriously, folks, the mind boggles; much too much boggling to fit in this little blog, which has already well overrun its target word count. Perhaps the moral of this story might be, never trust a financier with your emotional wellbeing. It's wonderful and sunny today; don't you think a walk in the park would be nice?

And Phil Connors from the movie Groundhog Day offers some solid advice: "Don't drive angry!"

Read more here: Can Twitter predict the future? via Economist.com