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BeHappyNOW (< 20)

The Wisdom of THIS crowd.



March 25, 2010 – Comments (7)

The Wisdom of Crowds.

For those who are not aware, that is the title of a book written in 2004 that is worth knowing about, if not reading. Its central thesis is that a diverse collection of independently-deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts. For example, take an ox, ask 1000 random people how much it weighs.  Then ask 4 experts.  The 1000 non-experts opinion (collective opinon) is better than the opinon of the experts(and better than any one opinion from the non-experts).  Even better take 70,000 non-experts and have them pick stocks as a way to outperform the experts making 7 figures on Wall St.  Sound familiar? 

That is theoretically the working mechanism behind the CAPS community, and why, theoretically, a CAPS 5 star rating is much more valuable that a Value Line 5 Star rating.  A group CAN outsmart the pros IF (and this is a BIG if) the groups’ ideas are somehow caputred and shared with the group.   For stock picks, the CAPS stock picking game does the gathering, and condensing of the info in order to put the opinions of the crowd into a usable form.  But bringing together 70,000 investment minded people to create a wisdom generating behemoth and using it only to pick stocks is like buying a Ferrari and using it to only to drive to your neighbors for sugar.  Sure it does a better job at that than any other car, but the capacity of the car is much greater than the usage. (meta-thinking anyone? – see my post “THINK!!! I think?” if you dot get this) Part of what I am tryng to do here in CAPS is create additional value for/from this community. Kind of like an “off label” use for a drug – which may have been created to lower cholesterol, but if it can also grow hair you will benefit by using it that way too.  CAPS was created to find stocks, but it could do a lot more, and really help us create wealth much more effectively if we choose to use it for “off label” uses . 

Having said that … 

The results are in Part 1: CAPS Personal Financial Advice 

I asked 4 questions in my last post about Personal Financial Planning.  I said I would compile the data from the CAPS members at large in an effort to tease out the Wisdom of the Crowd.  One question was regarding what CAPS people use as a financial plan, Less than 10 CAPS community members (aka CAPSaicins) responded.  Surprising (to me). I thought there would be more community contribution but, as I have said I still am learning the dynamics of blogging and of this community. (As an aside what I am starting to piece together is that CAPS may be more like a party for “investors only” with drink and merriment and banter about investing, and that it is not a group that is really pulling together for everyone's mutual benefit like, say, a volunteer fire department.  But we may grow into the new role, or create a community within a community - of people who want to maximize the value of thier assets - and I mean non-financial assets in this instance).  In any case, I said I would compile CAPS members advice so that you would not have to troll through dozens of comments to find the pearls of wisdom.  So here it is.  This is the CAPS Personal Financial Plan Advisor 2010. I am interested to hear what people think.  It was not what I expected -  is it what you would have thought? What are your thots about the CAPS collective wisdom re Personal Financial Planning? 

CAPS Personal Financial Planning Strategy #1

1  Get a job     

      a -Make sure you love it

      b- Make sure it gives you a decent income

             i  Make sure you get decent raises   

2  Spend a good amount less than you earn

       a  Don't spend money on things you don't need.

       b Get good deals on stuff

               i Don't buy a cheap property in an area with high unemployment.

       c Take care of the things you have. (house, car, health) 

3 Save- according to your dreams 

4 Invest for a good return on your saved money

      a If you don't know what you are doing, invest in an index fund. 

5 Don't co-sign on a debt

6 Set realistic goals

7 Don't sell things for almost nothing--others will assume the objects have no value.

8 Give  

That's it.

Note that one CAPS member said something that differed from the rest in that it did not prescribe any universal ideas, like those above.  I suppose it could be called…  


CAPS Personal Financial Planning Strategy #2.

This strategy says, essentially, that what you should do depends on you, “It all comes down to risk and how much you could handle, your ability to learn something new, and determination.”  

As before I will comment with the rest of the crowd.  

Oh and I will also compile the data about which famous financial advisors in a post soon. 


As always  Be Happy (when?)  NOW....

Really, right freakin NOW.  I mean it If ya cant spontaneously smile, think of something that will do it for you (a great memory, your kids, your spouse, your parents, a Twix bar... whatever) Ahhh...feels nice huh?

7 Comments – Post Your Own

#1) On March 25, 2010 at 5:50 PM, Option1307 (30.45) wrote:

It was not what I expected -  is it what you would have thought?

I guess I'm not sure what you were expecting, the answers were basically what I assumed Fools would say.

What are your thots about the CAPS collective wisdom re Personal Financial Planning?

I didn't find anything intriguing about the Personal Financial Plan, it all seems rather basic and sort obvious IMO. The advice is good, and is always worth repeating, especially around a forum like Caps that likely has a lot of rookies/beginners.

While I didn't find the advice all that helpful, I do believe the power of collective wisdom around Caps is actually very powerful. I know I certainly have learned a lot around here the past 2 yrs. that I been a member. The idea and basic premise of Caps is great, yes there are minor flaws in the implementation, but overall it's great!

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#2) On March 25, 2010 at 10:49 PM, BeHappyNOW (< 20) wrote:


I was expecting something much less rudimentary - esp for rookies!!!  You even said it yourself "I didn't find the advice all that helpful".  That is because it wasn't (IMO too).  I expected more. 

I think if instead of "What is your Personal Financial Planning strategy?" I had asked, "What is your investing strategy?" I would not have received something like, “Buy an index fund" or "Find good companies whose prices are low.”  Sure, that is timeless and valuable information, but it is not really going to help many people on a practical level.  What constitutes a good company, and what constitutes a low price.  What about asset allocation, what about risk management, what about diversification?  It also presumes that stocks are the best way to go for everybody.  But most importantly this is a case of give a man a fish.  In my opinion (shared with 1 or 2 commenters on my last post), financial planning wisdom should provide the investor the tools to create their own plan (as well as making clear the importance of having a plan), NOT give one to them. IF the personal planning advice does merely give a plan instead of the tools, then the reasoning should be clearly laid out for analysis (for example buy good stocks at low prices cuz stocks are always the investment with the best risk-reward ratio, buy good companies cuz they are always lower risk that smaller companies, and buy at a low price cuz prices never stay lower for long).  Doing so allows the prospective investor to see if the plan makes sense to them.

I wont go into my all my thoughts on Personal Financial Planning since this is obviously a topic people are not interested in (which again is stunning to me given that this is an investing site, and that there seems to be a genuine need for more info on this topic - again, esp for beginners).  But since I am from the camp of PFP advice should provide tools and knowldege.  I may start out by saying that I think everyone should view their life like a business.  And any good business must have a business plan, and no two business have the same plan.  Part one of the plan, in my view, is certainly NOT to just get a job (even if you love it and it pays a decent salary with decent raises) – it is to get income – there is a BIG difference between the two (a job is one of many ways of generating income) Since the obvious question is then, “How do I create income?” I might then say, that there are a number of options, and the one that is right for you depends on you life’s goals /plan.  One option is to get a job.  This is the slow and steady approach that provides many people comfort emotionally, but it is highly inefficient if only because you are giving a chunk of the value of you labor to the person you work for (there are other big problems with it).  Option 2 is to work for yourself -  that this is much more efficient because you now keep 100% of the value of your labor. There are about 3 or 4 other major categories (asset classes if you prefer) of options that are as viable if not more so than “getting a job”.  Personally I believe that getting a job is the least valuable of the lot, and is basically the option of last resort – kind of like “if you don't know about investing go with an index fund”, but rather it is “if you don't know about all the ways to generate personal income, get a job”.  It is the “I don't want to think about the best way to solve this problem” solution (See by post on thinking called THINK!!! I think?).  I am not pooh-poohing it; in fact I am an advocate.  It is similar to how I am a big advocate of Index funds for most people – even though I would never do it myself and I would not suggest them for educated investors.   

I think each of the other things (save, invest, etc) were as incomplete, but I am rambling, which is pretty wasteful given the number of recs this post has gotten, so that it is likley to be seen by very few people.  I guess more people are interested in the “Who Am I” game, so maybe I will go back to that for my next post - or maybe post a song.  It is very interesting to see how a virtual community works – it too is not what I expected. I am always fascinated to see what drives people.

 Be Happy NOW/ Report this comment
#3) On March 26, 2010 at 12:21 AM, Option1307 (30.45) wrote:

It is very interesting to see how a virtual community works – it too is not what I expected.

The Fool is a really intersting/intriguing place . I know you're new but you will soon realize what I'm talking about, although it sounds like you're already discovering themany oddities around here.

Many really well written investing blogs go unnoticed simply b/c the member lacks "street credit", for lackof a better term. Also, depending on the time of day, and day of week, valuable posts sometimes gain little attention b/c there are so few members around during the late night/weekend hours (US time).

but I am rambling, which is pretty wasteful given the number of recs this post has gotten, so that it is likley to be seen by very few people.

Sometimes people are just lazy, or the frequent commentors are busy that day. It seems like there is a certain amount of recs/responses that are needed, once reached a post will take off in popularity. It's really rather strange, but I guess makes sense. If other Fools like posts, it must be good right??!

I hope you don't get turned off by the lack of responses/recs, they will come in time. I certainly find your posts interesting and thought provoking at the very least.

is certainly NOT to just get a job (even if you love it and it pays a decent salary with decent raises) – it is to get income

I couldn't agree with you more. I think too many people get stuck in the common track of finshing school and then diving right into their profession (based off their degree) withlittle to no thought about other options. Not that there is anything wrong with finding a job asap, but I guess my point is that most people leave college with a very narrow view of what they can/will do in life in regards to a job. They aren't open to other career options of even other sources of income. I'm in my mid-20's and have seen the majority of my friends/peers finish school and then directly head into the workforce and profession basically b/c "that's what you do". There was never discussion of applying their knowledge to other areas of life. Sad, but they way our society is set up IMO.

One option is to get a job.  This is the slow and steady approach that provides many people comfort emotionally,

I agree it certainly does provide a lot of emotional comfort to most. However, as I mentioned above, I think the real problem is that most people simply do not think/realize they have other options besides directly entering the work force and being a 9-5er. Seriously, people don't explore other possibilities.

But since I am from the camp of PFP advice should provide tools and knowldege. 

100% agree. Otherwise you have to continually tell people what to do! Ugh!!!

Keep your posts coming, quality stuff here. Besides, soon enough you'll be swimming in recs!

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#4) On March 26, 2010 at 1:56 AM, miteycasey (29.06) wrote:

I'm not shocked by #1. 

IMHO the average Fool has a job that's above the median for their area and what they talk about  'investing' here is there discretionary income and/or retirement money. Very few own their own business and/or have passive income, yes a larger percentage than the average population,but this is an investment site.


A better question is why is it this way?

Why do more people not have passive income?

I'd say because it's the paradigm they live. They've been taught for generations to go to school, get married, get a job, retire. The idea of starting your own company, or having passive income, is as foreign to them as not eating beef. 

I'd also say because they don't know how to get started and they don't have the time to learn.

For example rental properties. Many people would like to have one, but they don't know where to start to find one. Or if they do find one they don't know how to start a business, or how to get financed as a business.

Then others hear horror stories about bad renters and say to themselves "I don't want to get involved in that". Never do they hear 90% of the good stories. 

 I could go on, but it's off to bed. 

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#5) On March 26, 2010 at 11:10 AM, Yort2000 (91.80) wrote:


This was by far the worst post of your blog until you added comment #2.  I think you were probably a little disappointed in the responses to your previous post. 

 I think when you say "Personal Financial Planning" people automatically think of budgeting, saving, investing, asset allocation, etc.  And, most on this board probably already think they have that covered.  What you seem to be advocating is "Life Planning" and I believe your insight and experience can be very valuable to this community.  So, please don't assume that "this is obviously a topic that people are not interested in".


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#6) On March 26, 2010 at 11:11 AM, RonChapmanJr (29.77) wrote:

You may have already addressed this, but if you want more attention (recs and responses) start rating some stocks and show the community you are someone we should listen to.  Very few people have gained any popularity on CAPS without doing that.  A person's CAPS score is the main thing I use when deciding whether to read a post.  I read this one only because I was curious about the title. 

Good luck.

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#7) On March 26, 2010 at 8:13 PM, eldemonio (98.24) wrote:

I need more clues.  Other than you going to Wellesley High School with Phil Laak, I've got nothing.

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