This is pretty cool.

I’m currently reading the book The Wisdom of Crowds by James Surowiecki. It is about how, if they have the right characteristics, a crowd of individuals is smarter than any individual within the crowd. That is, the crowd is smarter than the people that compose it. This is why, for example, the stock market is so successful, overall.

I haven’t finished the book yet, but one thing that it has already discussed, to illustrate this concept, is the idea of political markets. These are markets, much like the stock market, in which people trade futures on politicians. That is, politicians get valued based on how likely the market deems they will win the election. It turns out that these markets are incredibly accurate in predicting winners. They are even more successful than polls of the very voters who will decide the election. When applied to Hollywood, they are they single most accurate predictor of opening day success for movies.

Slate magazine has collected all of the political markets out there and put them on one page. It is fascinating what they are predicting right now. Right now, Obama stocks are particularly hot, worth $70 to Clinton’s $28 (the price is how much it costs to get $100 back if your candidate wins the election; you get $0 if they win. If your candidate had a 100% chance of winning, it would cost $100 to get a $100 share). On the Republican side, McCain is crushing Huckabee $94.20 to $1.70. If you just ask which party is going to win the general election, a share of the Democratic party is worth $65.80 and the Republican party, $33.70.

It will be interesting to see how these markets continue to play out the rest of the election season. To the extent that they are successful, we may see these kinds of markets more and more in other settings requiring decision making.

I also strongly recommend The Wisdom of Crowds. It is a fascinating subject and really tells us something profound about how we should compose groups that have to make tough decisions. In my post on Presidential experience, I mentioned that I think it is important that Presidents surround themselves with a diverse talent pool, with diverse opinions. The lessons from this book are why I think that.

The image is from the Slate article quoted above.