Comments on: The Wisdom of Sticks

By: Keith M Ellis

Keith M Ellis — Sun, 22 Aug 2004 15:02:47 +0000

James, you should be forgiven for being a little short in regards to roboslave as it’s obvious he/she has a chip on his/her shoulder and was snarky from the get-go. I’m just sayin’.

By: Jonathan W. King

Jonathan W. King — Sun, 22 Aug 2004 04:03:12 +0000

James Surowiecki writes: > > Jonathan, where are you getting this data? > The last trade on the IEM’s VS market in > Kerry was at 0.496, while the last trade in > Bush was at 0.503. That sums to 0.999. I got the data when I originally posted, about size hours before my reply and your reply to my reply. At that point in time, the “last trade” numbers were what I said. The gap did close up, and it’s still gone now. A lot can happen in 6 hours, especially if somebody posts a hot tip on the ‘net. :-) The arbitrage noted in the book review was present long enough to be noted by several people. Looking at the closing price data, it might have been available between 8/17 to 8/19 but only got very large for the one day. On 8/13, there was the opposite opportunity (Kerry led the WTA, Bush the VS). Hope this helps.

By: James Surowiecki

James Surowiecki — Sat, 21 Aug 2004 00:11:29 +0000

Sorry about that, Daniel. I figured that’s what you meant. My clash with Robotslave was just making me sensitive, I guess.

By: dsquared

dsquared — Fri, 20 Aug 2004 23:53:58 +0000

James: I was joking, for heavens’ sake man. Lots of individuals are no good at coming up with questions; a small number are.

By: James Surowiecki

James Surowiecki — Fri, 20 Aug 2004 21:54:19 +0000

Jonathan, where are you getting this data? The last trade on the IEM’s VS market in Kerry was at 0.496, while the last trade in Bush was at 0.503. That sums to 0.999. What IEM calls the “average price” is 0.496 for Kerry, 0.501 for Bush, which also sums to just about 1. Contrary to what you’ve been saying, there is no internal arbitrage available in the VS market.

By: James Surowiecki

James Surowiecki — Fri, 20 Aug 2004 21:44:36 +0000

Daniel, now you have me confused. You argued that “crowds are very good at answering questions, but not so good at deciding what questions to ask,” which I assume means that we’re better off relying on individuals to decide which questions to ask. My supposedly Friedmanesque assumption was that we can rely on individuals to come up with the questions they want answered. What’s the real difference between those statements? And how is my assumption Friedmanesque?

By: Jonathan King

Jonathan King — Fri, 20 Aug 2004 21:42:16 +0000

dsquared writes: > > Jonathan: prices in the VS market ought to > sum to 1.00 minus the time value of > money (important caveat) Yes, but I had even less caffeine in my system than I had thought. I added .492 and .49 and got .962, which was so far below 1.00 that I just blew off the time value of money part for this, a 64-day contract. Even with the correct math, though, you can calculate a risk-free return of almost 11% per year at this price. But thanks again for the attention to detail I can’t manage on a Friday, it appears.

By: dsquared

dsquared — Fri, 20 Aug 2004 20:28:34 +0000

I wrote the book on the assumption that individuals have little trouble coming up with questions they want the answer to. I refer the hon. gentleman to my post “The Correct Way to Argue With Milton Friedman”. (I also disagree on whether racing crowds are all that, but perhaps that’s for another time)

By: James Surowiecki

James Surowiecki — Fri, 20 Aug 2004 20:24:02 +0000

Why should an individual have to refine his or her search? Because it’s the individual who’s asking the question. Maybe it’s just me, but I don’t see how we can expect any problem-solving method to solve a problem when the problem itself is completely unspecified. If you ask a group of money managers: “How much is a company worth?” you’re not going to get a very good answer. You need to tell them what the company is, what it does, etc. to get a good answer. Similarly, if you ask Google “Get me information on teens” it’s not surprising that the answers you get aren’t that great. As I said above, I have no problem with the formulation that groups are good at answering questions, not asking them. I wrote the book on the assumption that individuals have little trouble coming up with questions they want the answer to. My argument is that collective decision-making is often the best available way to answer them. In any case, regardless of what you learned in school, it’s a lot harder to answer, for instance, the question: “What are the odds of winning on each of these seven horses?” than it is to ask it. And the crowd of bettors consistently answers that question better than any single individual can.

By: RobotSlave

RobotSlave — Fri, 20 Aug 2004 20:06:39 +0000

James: I bet if we had a contest, I’d win. Therefore, I’m right. Solely in the interest of demonstrating the poverty of that rhetorical technique of yours, I’ll just turn your proposed contest on its head. Let’s see who can find better books on a given topic. You get to use Google (which has access to quite a few card catalogues, in addition to other book-finding resources, such as Amazon). I, on the other hand, get to use a Librarian, with all of the tools librarians normally have at their disposal (including or not including Google, depending on what, precisely, we are trying to test, here). Incidentally, why should an individual have to refine her search when she uses Google, James? Are all people equally skilled at refining google searches? Google currently factors successive search refinements into its indexing algorithm; shouldn’t this aggregation, under your grand theory, obviate the need for search refinement on the part of the individual? Shouldn’t crowds be better at refining searches than individuals? No, of course not. You have to figure out what question to ask, naturally, and crowds just can’t do that, as has been pointed out by others here (and dismissed, wrongly, by some). When I was in school (before Google came along and, with its crowd-wisdom, removed the need for school) I was taught that the hardest part of finding an answer is very often asking the right question. It would appear that this is still the case, and another billion PageRanked teenage poetry blogs aren’t going to make it go away.

By: Randolph Fritz

Randolph Fritz — Fri, 20 Aug 2004 17:46:48 +0000

“You pick your librarian (or librarian, if you want experts in different fields), and we can see whether they (relying on no search engine) or Google can find better information on the Internet more quickly.” Try it in architecture, dance, or music—in fact, any of the non-verbal arts. Even in literature I think you might have problems. Or try it in any currently politically controversial subject—the difference between the results for “global warming” and “global climate change” is quite substantial. Google is very large and, for current problems of wide popular interest in which there is consensus, very useful. Where there is conflict it is usually possible to identify blocs of viewpoints, but it is not, without outside knowlege, possible to evaluate those viewpoints. And on subjects which are not current, or easily written about, or of wide interest, Google is of questionable value.

By: dsquared

dsquared — Fri, 20 Aug 2004 17:11:52 +0000

Jonathan: prices in the VS market ought to sum to 1.00 minus the time value of money (important caveat)

By: dsquared

dsquared — Fri, 20 Aug 2004 17:01:50 +0000

the simple idea that anyone who notices a mistake in the price of a speculative market can make money by fixing that mistake. This is a fairly strong claim about market microstructure and IMO only true in special cases.

By: Jonathan W. King

Jonathan W. King — Fri, 20 Aug 2004 16:04:56 +0000

I wrote (about the IEM arbitrage): > > It’s gone now. Bush vote share is .492 to > Kerry’s .490. WTA for Bush is .51 to > Kerry’s .49. I plead insufficient coffee. Obviously, share prices in the VS market must sum to 1.00, so right now there is another pretty tremendous buying opportunity. But the IEMs are pretty thinly and unevenly traded right around now, so good luck on cashing in.

By: Aaron Swartz

Aaron Swartz — Fri, 20 Aug 2004 16:04:14 +0000

I came to much the same conclusion except instead of giving the book points for being well-written (although I do respect the columns), I thought it was seriously irresponsible to publish a book with that title and those claims, and then do nothing to test them or back them up. My review: Surowiecki needs a crowd to make him wise “Upon hearing about a book on ‘the wisdom of crowds’, I expected it to answer three questions: Are crowds wise?, When are they wise?, and Why are they wise? Sadly, this book answers none of them. …”