If you see a crowd outside a department store it is reasonable to assume that there is a sale. If you see a queue outside a bank there is a good chance that ner

If you see a crowd outside a department store it is reasonable to assume that there is a sale. If you see a queue outside a bank there is a good chance that nervous depositors are trying to withdraw funds. In both cases the actions of other people send a signal that may be useful for others to follow. But does the wisdom of crowds apply to investment? The 'wisdom of the crowds' concept is not applicable here. In the example of the cow auction, the core idea is that a crowd of people all voting anonymously but without communicating with each other was better than any expert at the auction when averaged together. Communication within the crowd hinders the wisdom of the crowd. If people are allowed to see the votes of other people before they vote, then herd mentality dominates. To work best, each person must make their decision based on their own out-of-band information network, gut feeling, voodoo magic or whatever. If they can see what other people are doing, then they will short circuit their normal decision process and react to that. This is the problem with a lot of implementations of "crowd intelligence" gathering software and rating systems. This is why many polls don't show you the totals until after you vote, and why exit polling is bad. (as an aside, this is also why I've been a huge proponent of removing vote tallies on HN comments. I'm excited to see pg is playing around with it and to see if it helps.) Edited to add: The article states: The wisdom of crowds only really applies when forecasts are genuinely independent, as when farmers are guessing the weight of a bull at a country fair. Once you know what others are thinking, their views lead you into error. It's more than just that. It needs to be a diverse set of people to get a full range of opinions. A group that all pulls information from the same source will estimate incorrectly. For example, if CNBC were to become the sole source of information for the average investor, it wouldn't work. There are also several cognitive biases that come into play and it's a lot more complex than just keeping people in the dark.