Instant Messaging Networks and the Collective Genius of Profitable Day Traders
Brian Uzzi, Kathleen Hagerty, & Serguei Saavedra
Synchronicity has been called one of the most pervasive and mysterious drives in all of nature. Analyzing unique, fine-grained stock trader data on more than 1 million moment-to-moment trades and over 2 million instant messages for a two year period spanning the 2008 crash, we report three results regarding sync and performance. First, we find novel patterns of synchrony among stock traders and a positive association between it and profitability. Second, trade sync and profitability have a parabolic association. As traders move from asynchronic to highly synchronic trading their profits increase up to a threshold of sync and then reverse. Third, we find that traders’ non-overlapping instant messaging networks trigger sync and explain its relation to system performance. We discuss how synchronicity may reduce information uncertainty and generate collective benefits in diverse human systems of collaboration and competition.
Brian Uzzi is the Richard L. Thomas Distinguished chair in leadership at the Kellogg School of Management, Northwestern University. He also co-directs NICO, the Northwestern Institute in Complex systems and holds professorships in Sociology and in the McCormick School of Engineering.
His research has appeared in the American Sociological Review, Administrative Science Quarterly, Management Science, Strategic Management Journal, American Behavioral Scientist, American Journal of Sociology, Nature, PNAS, and Science. Synopses and commentaries on his research have appeared in Newsweek International, the New Scientist, Science, The Economist, Kellogg World, and other international media outlets. Athena Unbound, his book on gender differences in science, was published by Cambridge University Press.