Average out your own estimates for a better result

January 13, 2009

In current Psychological Science:

Wisdom of Many in One Mind:
Improving Individual Judgments With Dialectical Bootstrapping

Stefan M. Herzog and Ralph
Groups are better than individuals at making
judgments about the future and other unknowns, because individual errors tend
to cancel out. Can the power of averaging that underlies this “wisdom of
crowds” be harnessed to improve individual judgments too? This study
shows that averaging an individual’s first estimate with one made later
fosters accuracy. A single mind can thus simulate the wisdom of many.

The Cult of Committee

August 2, 2007

The Cult of Committee by Barbara Kiviat in Time Magazine.

Interesting piece on group decision making in an investment firm.

  • “There are a zillion independent variables, and it’s very hard for one person to think about them all.”
  • “When an analyst thinks a company is something Dodge & Cox would be
    well advised to hold for five years, the analyst makes the case to an
    investment-policy committee.”
  • “It’s not a strict vote…The process…is like
    taking the temperature of the room.”
  • “That ability to make complex strategic decisions collectively requires
    an almost Benedictine devotion to corporate togetherness, starting with
    physical space.”
  • “Dodge & Cox has also found there to be an important structural
    element to team decision making. “Committees react best to a specific
    proposition,” says Bryan Cameron, director of research and a member of
    the committees that pick domestic and foreign stocks. So when analysts
    make a presentation, they propose a particular course of
    action–increasing the percentage of Wal-Mart from 2% of the portfolio
    to 2.2%, say. The analyst advocates, and the committee
    meditates–somewhat like a jury.”

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