The 'Wisdom Of The Crowd' is a popular concept at the moment. In the American drama series of the same name a Silicon Valley techy builds a digital platform for people around the world to share and assess evidence with a view to solving crimes together. The ABC science programme Catalyst recently devoted a whole show to the idea.
The concept comes from the book 'The Wisdom Of Crowds' by American author James Surowiecki. The idea he puts forward is that the aggregation of information from a group can often result in better decisions being made than could be made by any single member of the group - even if the single member is an expert in the field in question. He says that some groups can be very intelligent as a whole and can actually be smarter than the smartest people in them.
(1) Each person in the crowd should have some information to share about the subject in question. For example, it's no use asking an Eskimo who has never heard of Winx if the horse is the best in the world - because he simply has no knowledge of the subject.
(2) The members of the crowd should also have their own independent opinions - not opinions that are determined by those around them. In fact, Surowiecki considers that too much communication within a group can make the group as a whole less intelligent.
(3) There should be decentralization wherein people are able to draw on their own particular knowledge.
If all of the above boxes are ticked, the information should also be able to be aggregated so that the individual judgements of the members of the crowd can be turned into a collective decision.
A common application of the Wisdom Of The Crowd concept is in a prediction market. One example would be making horse racing selections. In fact, it is this type of application, where the value of an answer can be readily assessed by a simple result, where the Wisdom Of The Crowd concept can really grow wings.
Deane Lester is probably the most respected racing analyst in Victoria. We monitored his race selections during September and October 2018 and found that he achieved a 39% strike rate. Tony Brassel is based in Sydney and is also a high profile racing analyst. We also monitored his selections in the same races and found that he achieved a 43% strike rate. Both analysts' selections returned a tidy profit over the period.
Both Lester and Brassel fit the criteria needed to be members of a 'wise' crowd when the subject in question is making horse racing selections. Both have their own information, independent opinions and draw on their own knowledge of what makes a selection likely to win.
If Surowiecki's Wisdom Of The Crowd concept holds true, then Lester's and Brassel's decisions when combined should provide a better outcome than either of the experts on their own. To test the concept we tallied up all the times that both Lester and Brassel made the same selection in a race. We found that in races where they both chose the same horse to win their strike rate increased markedly to 65% and profit on investment sky rocketed - proving that two heads can be better than one.
Now let's add another member to the 'crowd' - race caller Matt Hill. Over the same period Hill recorded a 33% strike rate but a slight loss on investment overall. Would adding Hill to our crowd improve outcomes considering that his selections over the period made a loss? The answer most likely would be 'yes' because Hill still has his own unique information to add to the crowd's wealth of knowledge. In fact, adding Hill to the crowd upped the strike rate yet again. In races where Lester, Brassel and Hill all selected the same horse to win their strike rate was 77% and return on investment was a whopping +105%.
Bill Benter who famously built a mathematical selection model that has made him millions and probably the most successful bettor the world has ever seen, had a 'Eureka' moment when he decided to include the public's opinion (i.e. the market odds) as a variable in his model. He said "This was an extremely important step in the model's development - for the model's estimates were able to incorporate whatever information could be gleaned from the public's estimates".
At Aussieraces.com we have embraced the Wisdom Of The Crowd concept. If our independently selected pick in a race aligns with other successful racing analysts' opinions, we have found that the likelihood of the selection winning increases. For example, at the Caulfield races on September 22nd we rated Spending To Win on top to win his event. There was nothing special about that except that the horse was at double figure odds. We also noticed that both Deane Lester and Tony Brassel selected the horse to win. Therefore three different racing analysts used their own information, their own opinions and their own knowledge to arrive at the same conclusion that Spend To Win, a horse at relatively long odds, was the galloper to beat in his race. Win he did at odds of $12. It was also a nice win for 'The Wisdom Of The Crowd'.