If you are looking to establish a predicted outcome for a difficult conundrum, it is reasonable to assume that surveying a large number of people for their prediction will generate a relatively accurate collective guess. This theory is known as Wisdom of the Crowd and can be an effective way of making decisions when faced with uncertainty, such as on a sports betting prediction.
However, this method is only viable if you can establish when the crowd is reliable and when they are acting as a foolish herd, so how do you know when they are getting things wrong? Read on to find out.
What is Wisdom of the Crowd?
Wisdom of the Crowd works by getting a large number and variety of people to predict an outcome for a certain scenario. The theory dictates that the participants will over and underestimate outcomes in approximately equal measure, leaving the average of their predictions as close to perfect.
While this method cannot guarantee that you will guess the exact number, in most cases your guess should be at least somewhat close to the actual outcome
This phenomenon was first observed in the early 20th century by the anthropologist Sir Francis Galton. While attending a livestock fair, he observed a competition to guess the weight of a butchered ox. Nobody correctly guessed the exact weight, but Galton calculated that the median of all the guesses submitted was within 0.8% of the answer.
As explored in James Surowiecki’s 2004 book The Wisdom of Crowds, the method transcends many aspects of decision making and can be applied to a wide and fascinating cross-section of scenarios. Among the most notable is the search for the USS Scorpion submarine, which was lost in the North Atlantic ocean in May 1968.
The navy’s search efforts were only able to locate the wreck within a 20-mile range. In a test of collective wisdom, naval officer Dr John Craven sought individual insights from a broad and varied group of naval and salvage experts, and utilised their collective information to pinpoint a location that turned out to be just 220 yards from the actual wreck of the Scorpion.
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