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The wisdom of the crowd: what will replace the financial dimension
Material posted: Publication date: 22-04-2016
Often the composite opinion of Housewives, workers and students is more accurate than the predictions of professional analysts. How to use collective intelligence in business?

When the crowd is right

In 1906, the famous British scientist Francis Galton went to a County fair, where as entertainment visitors were asked to assess the eye weight put on display the bull and write this figure on a special ticket. For correct answers, the organizers of the show promised prizes. As a result, in the vote was attended by about 800 people — both avid farmers and people far from pastoral Affairs. After gathering this fair all tickets for analysis, Galton calculated the arithmetic mean for the whole sample size was 1197 pounds. The real weight of the ox was 1198 pounds. In some inexplicable way, the diverse crowd gave the answer, as close as possible to the real indicator. Galton, who believed in breeding and superiority of one people over others, was forced to change the vector of their research.

Statistics show "Who wants to be a millionaire" shows that in the case of a call erudite friend the correct answer was selected only in 65% of cases, and when the player chose the help of the audience, the answer of the majority was correct in 91% of cases.

In the boom times, the study of group dynamics (20-60-ies of the last century) such research the wisdom of crowds was conducted very much. For example, sociologist Hagel knight asked the students to estimate the temperature in the room. Average arithmetic indicator of the views of the group reported that the temperature in the room should be at the level 22,44 degrees while the actual temperature was 22.2 degrees.

Studies of different complexity levels for different groups and in different areas of knowledge (sports, politics, Finance, technology, show business) has shown that the crowd is not as dumb as people think. The key problem is how to efficiently collect and analyze a large sample of opinions. Now that the smartphone has almost every inhabitant of the Earth, the technological constraint is lifted.

Analysis tool

A technological Internet start-UPS I have been doing since 2009. In early 2015 we are partners with the idea to create a new format of mobile news media. Invested $20 thousand of their money, we started to develop mobile game app Vote.

There are plenty of news aggregators, but nobody gives readers the possibility to interact with them, usually only to comment and rate and "like". So to Vote we invited users to predict the outcome of news, to compete in their forecasts with other users. People use the app as a platform, which can be used to publicly demonstrate their analytical skills.

In parallel we started to look how to enter the global market especially in USA and English-speaking audience is not comparable with Russian. Simultaneously with the release of the first version of the application we received an offer from the Starta accelerator Accelerator and I bought a one way ticket to new York.

At some point, it became clear that Vote — not just a toy, users give very accurate total weighted average forecast in a variety of areas. We started looking at research on the topic. Scientists have managed to identify the pattern according to which the average opinion of the crowd at observance of some conditions (decentralization, heterogeneity and the minimum level of knowledge) in 80% of cases in the long term will more accurately predict the most competent expert in this field. Confirms the hypothesis and the research firm Estimize, claiming that the collective intelligence gives more precise forecasts by 69% than that of the analysts for the past 5 years.

Then we started to look at different areas of the business to assess the areas in which data on the weighted average opinion represent the greatest value. The answer was on the surface — financial and economic sectors.

Market opinions

Financial market is a daily prediction of the future in pure form. At what price and when is the best time to buy shares of Facebook, the Brent crude oil or the us dollar? On all these issues, traders and analysts make forecasts every minute. We spoke with the traders on wall street and learned that their desks are littered with analytical reports from different companies with the same data that are different except the language. Every year the pace of information is accelerating, and the value of such reports falls — less professional traders they are read and taken seriously.

The fact that most current analysts associated with, for example, predictions of the future in Finance, created a limited number of experts using approximately the same information. We conducted 20 interviews with analysts and traders on wall street, and they confirmed our guess: 95% of financial intelligence is created based on the same insights.

At the same time on different kind of financial analyst in the world spend serious money. Only in 2015 professional traders and enthusiasts to trade on the stock exchange spent for purchase of data on financial markets for more than $50 billion Of which $4 billion went to professional analytical systems and services (Predictive Analytics). By 2020 this figure will increase approximately six times. And this is only a professional analytical system. B2C market financial information to non-professionals simply huge — for example, in the U.S. 54% of residents at least once in my life bought any shares, but in China the trade on the exchange are approximately 30% of residents.

Realizing that the financial world desperately needs quality forecasting, we have created on the basis of our application a separate service for analysts — Cindicator, which use the data of the app Vote. Its essence is that the analyst can access the index of the views of the crowd on the most important agenda for news events, ask questions and explore public opinion in real time.

Why do people answer questions? First, there is an element of gamification — you can outrun your friends in a sitting room Analytics on those topics in which you are not an expert, but I always wanted to Express their subjective assessment. Secondly, we decided to create for users and material motivation: each month, divide among two percent of the most accurate predictors (we call these people supermarketuri) prize money, thereby motivating them to make the most accurate predictions every day.

Finance and Economics is too serious and risky matter to make decisions based on the opinions of even the most professional of experts. We made a service that offers to listen to the opinions of people from different social groups, with different professional background and own unique experience. I am convinced that these tools will change the future.

Mikhail Brusov


 

Source: http://www.rbc.ru/opinions/business/20/04/2016/57174e6d9a7947172a16f352


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