The crowd said: "You're fatter than you think"

An economist discovers that a group will call 
him out on his own lies, even if they're inadvertent. 

Economist Lars Christensen was giving a presentation to investment advisors when he discovered a real life example of the "wisdom of crowds", the idea that a group gives a better answer than any individual expert.

He claims his experience is an illustration of the "efficient market hypothesis", where an individual investor cannot beat the market because a crowd will discover the true value of an investment. Others dispute this principle and say it is possible to consistently find investments that will rise in price. I don't know which economic theory is true, but Mr. Christensen does share a good anecdote:
I ask the audience to guess my weight. They all wrote their guesses on a piece of paper. All the guesses was collected and an average guess – the “consensus forecast” – was calculated, while I continued my presentation.

I started my presentation and I naturally started telling why all of my forecasts would be useless – or at least that they should not expect that I would be able to beat the market. I of course wanted to demonstrate exactly that with my little stunt. It was a matter of demonstrating the wisdom of the crowds – or a simple party-version of the Efficient Market Hypothesis.

I am certainly not weighing myself on a daily basis so I was“guestimating” my own weight then I told the audience that my weight is 81 kilograms (fully dressed). I usually think of my own weight as being just below 80 kg, but I was trying to correct it for the fact I was fully dressed – and I added a bit extra because my wife has been teasing me that I gained weight recently.

As always I was completely confident that the “survey” result would come in close to the “right” number. So I was bit surprised when the ”consensus forecast” for my weight came in at 84.6 kg

It was close enough for me to claim that the “market” – or the crowd – was good at “forecasting”, but I must say that I thought the “verdict” was wrong – nearly 85 kg. That is fat. I am not fat…or am I?

So once I came back home I immediately jumped on the scale – for once I hoped to show that the Efficient Market Hypothesis was wrong. But the verdict was even more cruel. 84 kg!

So the “consensus forecast” was only half a kilo wrong and way better than my own guestimate. So not only am I fat, but I was also beaten by the “market” in guessing my own weight.
Via: Wise Crowds Tell No Lies, Marginal Revolution>>

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