Black Friday, Games and the Stock Market

Black Friday has come and gone.  The massive surge into the shops which was anticipated in much of the media failed to materialise.  Many retail outlets were quieter than a normal Friday.  In contrast, internet shopping went wild.  Amazon had its biggest ever day in the UK, selling over 7 million items.  Argos and John Lewis experienced problems with their websites because of the huge number of visitors.  For the first time ever, online sales are believed to have exceeded £1 billion in a single day.

Experiences such as this raise fundamental questions about the predictability of many social and economic events.  The Office for Budget Responsibility handed George Osborne an extra £27 billion to play with in his Autumn Statement by revising its forecasts through to 2020.  Many commentators have pointed to the large amount of uncertainty which surrounds them.  But these are predictions over a five year horizon.  Even just a week ago, many believed that the shops would be packed on Friday.  The retailers themselves geared up for the crush.  But it did not happen.

It is always possible after an event to rationalise it. On Black Friday 2014, in an Asda store, shoppers trampled each other and fights broke out as they attempted to grab bargains.  This mayhem was publicised widely.  Looking back surely it is obvious that this is why people went online rather than risk a repeat of last year’s chaos?  In fact, so-called hindsight bias appears to be deeply rooted in our individual psychologies.  Something happens, and we often come to believe that it was inevitable. But this is not what the retailers and the media thought in advance of last Friday.  We conveniently forget that we failed to predict it even the day before.

Approaching last Friday, consumers were essentially playing something called the Minority Game.  You want to go shopping, but not if there will be huge crowds.  If the shops are empty, it is not enjoyable.  Like baby bear’s porridge, you want it just right, not too many, and not too few.  Parisians leaving the city for their annual month off in August face a similar problem.  Giant traffic jams have been experienced at 3am in the morning, as everyone came to the view that the roads would be quiet at that time.  In stock markets, the ideal time to sell is just before the cusp when majority opinion shifts from being bullish to bearish.  You are in exactly the right size of minority.

Two Swiss physicists, Damien Challet and Yi-Cheng Zhang, formalised the structure of the game about ten years ago.   Since then literally thousands of scientific papers have been written about it.  The problem can be stated in words very simply, and it is one with many practical applications.  But even using hair raising maths, it turns out to be fiendishly difficult to solve.  In general, there is no strictly rational way to play.  To succeed you need to adapt your strategy constantly. The overall outcome is highly uncertain, just like Black Friday.

Paul Ormerod

As published in City AM on Wednesday 2nd December

Image: dice another day by topher76 licensed under CC BY 2.0

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Alex O’Byrne, Associate at Volterra, is an experienced economic consultant specialising in economic, health and social impact, economic strategy, project appraisal and socio-economic planning matters.

Alex has led the socio-economic and health assessments of some of the most high profile developments across the UK, including Battersea Power Station, Olympia London, London Resort, MSG Sphere and Westfield. He has significant experience inputting to EIAs and s106 discussions as well as drafting economic statements, employment and skills strategies and affordable workspace strategies.

Alex is also experienced at economic appraisal for infrastructure. He was project manager of the economic appraisal for the City Centre to Mangere Light Rail in Auckland. He also led the economic and financial appraisals of the third tranche of the Transport Access Program for Transport for New South Wales, in which Alex developed and employed innovative methodological approaches to better capture benefits for individuals with reduced mobility.

He is interested in the limitations of current appraisal methodologies and ways of improving economic and health analysis to ensure it is accessible to as many people as possible. To this end, Alex recognises the importance of transparent and simple to understand analysis and ensuring all work is supported by a robust narrative.

Alex holds a BSc (Hons) in Economics from the University of Manchester and he was a member of the first cohort of the Mayor’s Infrastructure Young Professionals Panel.


Senior Partner

t: +44 020 8878 6333

Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.