James Surowiecki
speaker
55 appearances
2 recordings
1 series
first heard Jan 2013
last heard Jan 2013
James Surowiecki’s voice in public audio — every appearance, attributed to the second.
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The crowd had guessed that the ox would weigh 1,197 pounds.
And when all was said and done, the ox ended up weighing 1,198 pounds.
So in other words, the crowd's judgment was essentially perfect.
It was actually better than any one person in the crowd.
And this is a phenomenon that you can actually see over and over again.
You can do this with a jar full of jelly beans or pieces of candy or whatever.
But the Galton example, I think, is a kind of perfect crystallization of
this idea of the wisdom of crowds.
I should say, I still think many financial markets do believe
still work reasonably well in terms of assessing values.
But I do think that the process over the last, say, 15 or 20 years has been a process of sort of getting more and more distant from hard reality that the market in theory is trying to assess.
There are some concrete ways in which this is true.
For instance, you know, the fact that companies stopped paying dividends as much as they once did.
A dividend is a kind of hard reality.
You know, in other words,
if you're trying to decide whether or not to invest in a company, if that company is essentially paying you on a regular basis for your investment, that gives you a kind of concrete incentive to try to assess the true value of that company.
And as dividends have become less common and less lucrative, that I think has encouraged more of a speculative bend.
I think that the spread of momentum trading and the kind of trading where people are really just trying to ride trends rather than actually
in a sense, being interested at all in the underlying asset has obviously played a major role in this.
And I think that there is a circular thing that gets going.
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