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Weighty Issue: Cow Guessing Game Helps To Explain The Stock Market


Next, we have the results of an experiment. NPR's Planet Money team recently put a photo of a cow on the Internet and invited the world to guess how much that cow weighed. They were recreating a very old, very famous performance that is supposed to explain how the stock market works. NPR's David Kestenbaum has the story.

DAVID KESTENBAUM, BYLINE: To do this, we needed a cow and a very large scale. We found both at the Burlington County Farm Fair in New Jersey.

What's the cow's name?


KESTENBAUM: Hi, Penelope. Thanks for letting us weigh you.

The original experiment took place about a hundred years ago at a county fair in England, and the results were eerie. The fair had a guess the weight of the ox contest. A scientist named Francis Galton happened to be there. And Galton thought average people would be terrible at guessing the weight of an ox. After all, what did they know?

So he did a little experiment. He calculated the average of everyone's guesses. And the crowd got it right to within one pound. This is the idea that underlies the stock market, that a bunch of random people buying and selling shares collectively somehow get the right answer. But is that really true? We took pictures of Penelope the cow to put online so that everyone could guess how much she weighed. And we also asked people at the fair. It happened to be kids' day.


KESTENBAUM: You guys want to guess how much this cow weighs?

UNIDENTIFIED CHILD: Yes, 60 hundred pounds.

KESTENBAUM: Like 6,000?


>>KESTENBAUM Do you know how much you weigh?


KESTENBAUM: I'm sympathetic. Did Penelope weigh more than my car, less than my car? I don't even know how much my car weighs. We walked Penelope the cow over to the scale.

What kind of scale is this?

UNIDENTIFIED MAN: It's actually, like, a truck scale, is what it's for. We use it to weigh the tractors during the tractor pull.

KESTENBAUM: It'll work for a cow?


KESTENBAUM: We cleared out all the spectators so we could keep the answer secret. Penelope walked onto the scale. And...

...It's 1,355 pounds.

We posted the photos of Penelope online and asked people to guess her weight. We also asked James Surowiecki to guess. He's a New Yorker columnist who's written a book about this called "The Wisdom Of Crowds."

JAMES SUROWIECKI: All right, I will guess that the cow weighs 725 pounds.

KESTENBAUM: We told him he was off by a lot. Penelope weighed almost twice that.

SUROWIECKI: (Laughter) That's so bad.

KESTENBAUM: We get a crowd of people like you - going to be terrible.

SUROWIECKI: We're going to be in bad shape. I'm praying somebody was guessing 2,200 on the other end.

KESTENBAUM: How did the crowd do? We got over 17,000 guesses, and we calculated the average, which came out pretty close. Penelope's actual weight - 1,355 pounds, the average of the guesses -1,287 pounds. So the crowd got it to within 5 percent. Surowiecki's reaction was, phew.

SUROWIECKI: Even though I've written a book and done this experiment a number of times, every time I do it, I'm like, it's not going to work this time (laughter) 'cause the idea is so counterintuitive. There's something magical about it. It's not magic. It's just math, but it seems magical.

KESTENBAUM: Surowiecki says the reason this works is that each person's guess has a different little piece of information in it. It's like we're all different scales. Individually, the scales can be lousy - one too high, one too low - but that averages out. What you're left with is pretty good. This is why it is so hard to beat the stock market. Usually, the crowd does a pretty good job of deciding what a stock should be worth. The people who say they beat the market, often they were just lucky.



KESTENBAUM: Is this Harris?

POLLACK: Yeah, how's it going?

KESTENBAUM: Harris Pollack got the weight of Penelope the cow exactly right. So we called him up to see how he did it.

POLLACK: I Googled it. I Googled, average weight of female cow, and it said - here, I'll get it - comes from dairymoos - dairy M-O-O-S - .com

KESTENBAUM: The site said average weight of a cow - 1,500 pounds, depending on age, et cetera. Harris looked at the picture of Penelope and said, she looks on the small side - 1,355. It was a guess.

POLLACK: Yeah, completely guess.

KESTENBAUM: We're giving him a trophy - a plastic one, with a cow on it. David Kestenbaum, NPR News. Transcript provided by NPR, Copyright NPR.