Wisdom of crowds may be the antithesis of mob rule. Wisdom of crowds refers to the idea that two brains (or many, many brains) are better than one. Large groups of people can come up with ideas, solve problems, and make astute observations and predictions better than one person, even if that person is supposed to be an expert.
The term comes from James Surowiecki’s book, The Wisdom of Crowds, which launched in one of the worst years for haircuts since the '80s: 2004. Yet, as you can probably guess, Surowiecki wasn’t the first human to think such things. If we go waaaay back, we can see that Aristotle’s theory of collective judgement in Politics is pretty much the same idea.
How does wisdom of crowds work? For one, it can help prevent bias. If there’s a bratwurst fan watching a what’s-the-best-sausage competition, they might be biased that the brat will win. A crowd of people who have different opinions on the contestants will come up with a better average guess of which sausage will win, which brings us to the second way wisdom of crowds works: averages. The average of guesses of a group might be closer to the truth than one expert’s guess.
Yet again, mob rule is an example of crowds not being very wise. Things like stock market bubbles that are the result of over-hyped stocks and markets are great examples of people being not-so-wise together. In order for a crowd to be full of wise-guys, the crowd needs to hold a wide variety of opinions, and one person’s opinion shouldn’t influence another person’s opinion. Rather, everyone’s opinion must be based on their own knowledge. This is just about the opposite of any stock market situation, which rises and falls largely because everyone is influenced by each other’s decisions.
Be a wise guy, and stick to the guns of your own knowledge.
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Finance: What is the gumball estimation ...1 Views
And finance Allah shmoop What is the gumball estimation Problem
All right You think it's a trick or black magic
or a grift But it's not oddly this gumball estimation
thing it seems to work in fish tanks everywhere Okay
what is it Well here's a fish tank It's two
feet by three feet by three feet and it's filled
with these gumballs the master fish and that it be
me asks the audience to guess how many balls are
in the tank Yes there are always a few physics
geeks and Willy Wonka workers out there who just no
like you know the physics geeks mumble that well the
tanks twenty four inches by thirty six inches by thirty
six inches around thirty one thousand cubic inches and that
one ball fits into a cubic inch self There should
be like thirty one thousand balls in this thing and
then the Willy Wonka People just kind of know you
know somehow like Mpaluku loving brains But the way more
interesting science see social event is that the masses seemed
to get to the right answer just by guessing like
with doing no math So how does this happen Well
we don't really know actually But some kid blurts out
ten thousand Mr And then the fish host writes that
on the blackboard then some other kid blurts out twenty
thousand onto the blackboard It goes And then another kid
who sounds even older than that Second kids as our
thirty thousand and another says half a million and the
audience laughs and the fish host writes it down But
then a few adults shot out two hundred fifty thousand
eighty thousand one hundred thousand And after twenty or thirty
or so in samples here for guesses the host fish
calls stop and he adds up two total and divides
buy in and gets an average from all those guesses
And here's the weird thing The guesses are uncannily accurate
How can this be Why can this be How does
this actually work Well it seems as if some of
us are pretty good guessers Others of us The optimists
among us perhaps routinely go over in our guesses while
all the Debbie downers out there will always go away
too low in their gases But there's about the same
number of optimists and downers out there so they kind
of coalesce around some middle of the bell curve And
that middle the bell curve seems he crazily accurate In
the end everything evens out And again we're not totally
sure how the averages come out so eerily correct But
try this with your friends Next time you go to
a party or a fish tank thing like we're at
here you know maybe we should all just shrug our
fins and revel in the mystery What do you think