June 2018: Guessing Jelly Beans
Have you ever seen that game where the goal is to guess the number of jelly beans in a jar? When you look at the range of guesses, you’ll find a huge disparity – some people’s guesses are surprisingly low while others’ are much too high. Yet, something amazing happens when you take the average of everyone’s guesses: The average guess ends up being right on.
This effect is referred to as “The Wisdom of the Crowds.” The term, coined in the book by James Surowiecki, proposes that the collective intelligence of a crowd can exceed that of any of its individuals.
The wisdom of the crowds is very relevant to investing.
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