Facts about The Wisdom of Crowds
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When individual errors are random and independent, collective estimates tend to cancel out biases, a statistical property central to the wisdom of crowds.
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Prediction markets, such as those used to forecast election outcomes, are a practical application of the wisdom of crowds principle.
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Successful application of the wisdom of crowds requires diversity of opinion, independence of individuals, decentralization, and an effective method of aggregating judgments.
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A classic demonstration of the concept involves Francis Galton's 1907 observation that a crowd's median guess for an ox's weight was remarkably close to the actual value.
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James Surowiecki's book The Wisdom of Crowds argues that large groups of diverse, independent individuals often make more accurate decisions than individual experts.