Ever heard of the term “Wisdom of the Crowd”?
It's a simple idea, first proposed by Aristotle in his work titled Politics.
It states the collective opinion of a group of individuals is superior to that of a single expert.
To illustrate this imagine you're at a carnival.
A well-known game is to guess the number of sweets in a large jar.
The most effective way to correctly guess the number of sweets in the jar is to wait till the very end, when everyone (the crowd) has given their guesses.
All you do is then simply take the average of all the guesses.
And invariably this average of the diverse group - is the closest to the actual number/result you are looking for!
This may seem a little impractical, but it illustrates how to harness the collective wisdom of the crowd.
And you could win a few sweets along the way.
But what does this have to do with sports betting?
Well in today's article I want to show you how you can use the wisdom of the crowd to make better and more informed betting decisions.
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How does wisdom of the crowd work?
Wisdom of the crowds was first observed in the early 20th century by Sir Francis Galton.
The Eminent anthropologist was at a livestock fair where he observed a competition to guess the weight of an ox.
Much like the simple carnival game of guessing the amount of sweets in a jar. Sir Francois Galton calculated the median of guesses and astonishingly was 0.8% within the correct answer.
Wisdom of the crowds transcends many aspects of decision making.
Here are two examples that show how Wisdom of the Crowd works:
“1. By averaging together the individual guesses of a large group about the weight of an object, the answer may be more accurate than the guesses of experts most familiar with that object.”
“2. The collective judgment of a diverse group can compensate for the bias of a small group. In trying to guess the outcome of a World Series game, fans may be irrationally biased toward their preferred teams, but a large group that includes plenty of non-fans and individuals who dislike both World Series teams may be able to more accurately predict the winner.”
So how does this pertain to sports betting?
How Wisdom of the Crowds can influence your sports betting prediction
Just like guessing the amount of sweets in a jar or the weight of an ox, the results of a sporting event cannot be known, yet even under these circumstances the crowd does generally provide an accurate assessment of the respective probabilities of the outcome.
Odds gain accuracy from the wisdom of the crowd by exposing it to the public.
As the markets become more liquid, meaning more people voice their prediction by placing bets, the market generally moves to its most efficient position, just as the more guesses of the number of sweets or the weight of an ox, the more accurate the average guess.
However, decisions aren’t made in a vacuum, so what happens when novice sports bettors give their opinion and weigh in?
Cognitive biases and information overload
Sports bettors that contribute to the movement of the market (the changing odds) are generally drawn from a wide spectrum of experience, knowledge and expertise.
An important theme I write about is cognitive biases and how they can impede rational thinking.
The majority of the money the bookies will see from novice sports bettors will be placed on the favourites, skewing the markets away from its most efficient position.
This is an illustration of how cognitive biases can influence Wisdom of the Crowd to look more like foolishness of the herd.
Another example when the crowd can’t be trusted is when we find Pump and Dump schemes in the form of market manipulation.
In the financial world Pump and Dump schemes refers to hyping up shares to inflate their price for short term gains.
This tactic is found in both the financial and sports betting world, where the speed at which information is shared has risen through social media which can distort the market further making the crowd seem untrustworthy.
However, sports bettors who are prepared to do the research and stack that up against the crowd will easily find out if the crowd is wise or can’t be trusted.
Until next time,
Head Tipster, The Winning Streak Team
P.S: Join the elite 2%
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