The Wisdom Of The Crowds

My friend Lars tried an experiment last week:

The Crowd: “Lars, you are fat!”

On Friday I was doing a presentation on the global economy (yes, yes mainly on global monetary policy) for 40-50 colleagues who are working as investment advisors in the Danske Bank group.

As I was about to start my presentation somebody said “The audience have been kind of quiet today”. I thought that was a challenge so I immediately so I jumped on top of a table. That woke up the crowd.

I asked the audience to guess my weight. They all wrote their guesses on a piece of paper. All the guesses were collected and an average guess – the “consensus forecast” – was calculated, while I continued my presentation…

I’ve done something of the same sort in some of the classes I used to run. It’s a great way to get audience participation, and to illustrate abstract economic concepts in real world settings. But Lars’ attempt was a lot funnier than mine. While I won’t hold this as proof positive that the efficient market hypothesis is valid under all circumstances, there is more than a grain of truth in it.