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How much does this cow weigh? (Classic)
Planet Money
Collective Wisdom and Information Cascade
When individuals guess the weight of a cow, each person's unique perspective and life experiences contribute different pieces of information, resulting in a collective wisdom where individual errors tend to cancel each other out. This collective insight is remarkably accurate due to the diversity of inputs. However, there are instances when collective decision-making fails, such as in stock market panics or bubbles, where individuals tend to follow a trend without critical thinking, leading to an 'information cascade.' This cascade effect is observed when individuals base their decisions on others' actions rather than independent judgment.
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