( CNN ) -- Social media sites have evolved into the global equivalent of the office watercooler , but could the buzz they generate be analyzed to predict real-world outcomes ? Leading British economist Noreena Hertz thinks so . She believes analyzing the chatter from Twitter and Facebook for example , will become a dominant force in the business of forecasting . `` Over the past few years I have been really quite obsessed with how technology is changing the way that we make sense of the world , '' she told CNN at Names not Numbers , an idea-sharing and networking conference in the UK . Read more : Facebook 's new Graph Search tool . Last year , Hertz carried out an experiment to demonstrate the power of social networks as a tool for better understanding human behavior . `` I was really interested to see whether we could make predictions or forecasts by listening in on what people were saying on social media . Because , if we could improve upon the political forecasts ; if we could improve upon sales forecasts by listening in on people 's chatter on Twitter , Facebook , those sorts of media , that would be a really exciting prospect. , '' she said . Her and a team of computer scientists , sociologists , and economists worked together to develop a method of research that they hoped would enable them to predict the winner of talent contest `` The X Factor '' . By developing a sophisticated algorithm , the team effectively `` listened in '' on hundreds of thousands of tweets at once and deduced not just the number and subject of messages but also , for the first time , the sentiment . In doing so they were able to make an accurate guess about who would stay and go each week . `` We were pretty much beating the bookies , '' she said . Read more : Facebook 'likes ' can reveal your secrets , study finds . Hertz has made a career out of challenging the predictive powers of traditional forecasting models , which she says are far from perfect . After all , she says , analysts in the Middle East failed to predict the Arab Spring and very few experts saw the financial meltdown coming -- something she did three years before in her book `` IOU : The Debt Threat '' . An influential economist , Hertz has a knack for prescience that has put her ahead of the curve among her peers . Her work is all about conducting research that gives raw data some context . It 's about understanding the culture , language and psychology of social media users , which , she says , has huge implications for both business and government . Under her school of her thought , in order for social media marketing to have any real value we need to understand what people 's actions really mean . `` If somebody tweets ' I like Coca-Cola ' , does that mean that they 're actually going to buy Coca-Cola ? One can ? Two cans ? Three cans ? If they retweet someone else 's Tweet , does that mean they 're going to buy it ? '' At the age of 19 , Hertz gained her degree at University College London ( UCL ) and then moved to the U.S. to study for an MBA . In her early twenties , she found herself in St. Petersburg educating Boris Yeltsin 's advisers in market economics . Here she gained inspiration for her PhD thesis , `` Russian Business Relationships in the Wake of Reform '' , at the University of Cambridge . In 2002 she wrote the book `` The Silent Takeover , '' which discussed the migration of power from government to corporations . In it she correctly anticipated that unregulated markets and huge financial institutions would , in the near future , have grave consequences for the rest of the world . Read more : Arianna Huffington tells women : 'Less stress , more living ' Today , Hertz is a professor at a number of universities and one of the world 's respected thinkers . Her pioneering concepts surrounding social media analytics have the potential to impact government policy , public security and economic growth . Her work highlights the inadequacy of the majority of data used by governments and corporations as an empirical measure of what we , the people , want . `` Language is too complex for a computer to understand , '' she said . `` It 's not going to be able to make sense of what people are saying en masse . We need a new type of discipline that puts together computer scientists and social scientists , who can add context to the situation . '' She may , so far , have only predicted the winner of a national singing contest but with the developments made in her `` X Factor '' experiment , Hertz has presented us with an unprecedented opportunity to foresee the events of the future by simply `` listening in on what the world really thinks . ''
Noreena Hertz is an economist who predicted global financial crisis three years before it hit . She believes social media can be a powerful forecasting tool for business and government . Hertz correctly predicted who would win talent show `` X Factor '' by analyzing social media .