The idea that crowds can be smarter than experts has a long history. Let’s find out if it’s true.

I’d like to perform my own experiment regarding the wisdom of crowds. This crowd, in fact.

Other than a CBS crime drama, the “wisdom of the crowd” is the idea that the averaged opinions of a large enough group of people can be more reliable or yield better results than the opinions of any single expert. Planet Money even showed that the wisdom of the crowd could be better than even the average opinion of a group of self-identified experts, at least as far as guessing the weight of a cow.

The concept appears to go as far back as Aristotle, who said that a pot luck dinner would be a more satisfying feast than any feast planned by an expert. Obviously, Aristotle never went to a pot luck put on at my church.

In modern times, we use crowd wisdom to set the values of our largest companies (the stock market), predict the future or our economy (Consumer Confidence Index), recommend entertainment (Rotten Tomatoes, Amazon, …), and error correct all the information in the world (Wikipedia, search engine rankings).

The wisdom of crowds seems to work through some kind of error correction inherent in the law of large numbers. It’s highly unlikely that any one person in the sample will be exactly right. But say we’re guessing the weight of a cow. One person might guess 200 pounds low while another guesses 200 pounds high. Neither one is correct, but the average of the guesses is spot on.

In fact, numerous experiments have shown that the average of the crowd’s opinions will be within five percent of the actual measurement, no matter what that is—so long as the individuals guessing don’t know what anyone else is guessing. Once that happens, people follow the leader (the person whose guess they overheard), often even if that guess is ridiculous. In the Planet Money episode, several kids guessed that a fully grown cow weighed about 300 pounds once they overheard someone else make that guess. She actually weight 1355 pounds.

We’re getting ready to sell this lovely house. How much do you think it will sell for?

How Wise Is This Crowd

So here’s my proposal. We’re getting ready to put the Russet Valley house on the market.

How much do you think Russet Valley will sell for?

We’ll accept guesses right up until we put the house on the market. We’ll even give the person who guesses closest to the closing sale price a nice prize. I don’t know…something. If there’s a tie, the prize will go to the first “winning” guess we receive.

I doubt if we’ll get enough responses to qualify as satisfying the law or large numbers, but I’d still like to do a little analysis—I have to keep up my geek credentials. So when you submit your guess, please indicate whether or not you’re a “real estate expert.” I’ll let you decide what that means. So that we don’t play follow the leader, please email your guesses to info@hermithaus.com.

Thanks for playing. I think this will be fun.