Wise Words, for Wise Crowds
By: GreatDecideBlog
Many people are familiar with the basic principles of the well known book The Wisdom of Crowds. The principles have been outlined here in previous posts and the book is one I highly recommend from our book club list. For anyone unfamiliar with this work, the basic argument of the book is that a group that is diverse in opinion, independent and thus not swayed by each others views, decentralized to allow the use of any specialization and local knowledge, that can have their individual opinions aggregated to an average solution, can make a better choice or estimate than any of the individuals within the group can.
An easy to understand example of this was demonstrated by finance professor Jack Treynor in his class, where he decided to put the classic contest of guessing the number of jelly beans in a jar to the test. He showed that with a jar containing 850 jelly beans, that the average of the guesses of a group adhering to the conditions above estimated that there were 871 jelly beans in the jar. Only one person in the group made a better individual guess than the estimate of the group. It is ok that a particular individual outperforms the group. What is interesting is that if you do the test ten times with a different number of jelly beans in the jar, the same person will not consistently outperform the group with the exception of the outlier genius.
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