In the heart of a bustling county fair, an extraordinary experiment unfolded, showcasing the incredible power of collective intelligence. A seemingly whimsical challenge emerged: Guess the weight of a cow on display. What initially appeared as a playful game soon transformed into a stunning demonstration of the “wisdom of crowds.”

A diverse group of fairgoers, each with varying degrees of knowledge and intuition, were asked two simple questions: How much does this cow weigh? Do you have any experience with the weight of cows? The goal was to see if anyone in the crowd could guess the correct weight and if experts would be superior to the average individual.

A fascinating phenomenon began to unfold. Although individual estimates ranged wildly, the average of all these guesses astonishingly approached the actual weight of the cow. In the end, the average guess for the non-experts was 1,287 pounds compared to the actual weight of 1,355 pounds. A difference of only 68 pounds. A bigger surprise: the expert’s average guess was less accurate at 1,272 pounds, a difference of 83 pounds.

The genius of this collective average lay in its ability to filter out errors and biases inherent in individual guesses. High estimates countered low ones, and the middle-ground approximations formed a consensus that defied the odds. This experiment showcased the concept of the “wisdom of crowds” that a diverse group’s collective knowledge can outperform the insights of any individual expert.

Translating this concept to the realm of financial markets, where stocks are traded and their prices determined, demonstrates a similar effect. The market comprises countless participants, each with their own insights, analyses, and biases. When these factors converge, the resulting stock prices tend to reflect the most accurate estimate of a company’s value at a given point in time.

This phenomenon finds its backbone in the Efficient Market Hypothesis (EMH), which proposes that stock prices encapsulate all available information. Much like the cow guessing average, EMH posits that the combined insights of countless individuals lead to fair and accurate valuations, making it incredibly challenging to outguess the market consistently. Financial markets react to new information quickly, updating prices to reflect the most up-to-date information and risks fairly. Rather than trying to outguess market prices, causing turnover, high fees, and trading costs, one is better off accepting and using market prices to your advantage. Invest in global capitalism rather than trying to outguess it.

From guessing the weight of a cow to the intricate world of financial markets, the wisdom of crowds continues to shape our understanding of collective intelligence. Just as a diverse group of fairgoers could accurately estimate the cow’s weight, the multitude of participants in financial markets work together to create prices that reflect a collective estimate of a company’s value. The efficient market hypothesis stands as a testament to the power of this concept, reminding us that while individual expertise is valuable, the aggregated insights of many can often lead to more accurate and reliable outcomes. As we navigate the complexities of the modern world, embracing the wisdom of crowds can lead to better decision-making and a higher likelihood of financial success.

My grade-school-age kids recently returned to school, which made me think about being a little kid again. Summer was always a time of unbridled joy and freedom for me. Even as a kid, I knew summer meant I had the freedom to get on my bike and ride to the nearby pool or meet up with my neighborhood friends for a game of street hockey because my schedule and routine were flexible. My biggest concern was whether or not I got a hit in my baseball game!

As we get older, those feelings start to change. We take on more responsibilities – summer jobs, summer school, and ultimately adulthood. Life speeds up quickly, and we don’t always do a good job of slowing down and living in the moment. We’re constantly thinking about what’s next and what we must do to keep everything moving forward. As Harry Chapin famously sang in Cat’s in the Cradle, “There are planes to catch and bills to pay.”

On a recent family vacation to Florida, I read a book by the former Duke basketball coach Mike Krzyzewski, Leading with the Heart. Coach K uses the metaphor of his team being on a train. He reminds readers that stopping and enjoying the moments while on the train is essential. Some of those moments are big milestones we plan and prepare for, while others happen unexpectedly.

So, as summer ends and we return to our busy lives of hauling kids to their various events, traveling, and everything else we have going on, I encourage each of you to take a moment to “pause at the station.” Whether things are improving or worse than anticipated, try to enjoy the moment. Enjoy the moment.

P.S. For those looking for some light humor, I recently created unique handshakes with each of my three boys (my daughter is a bit too young to have her own). Below is a video of my youngest son, Charlie, and me doing a clumsy version of our handshake on his first day of Kindergarten – certainly a major milestone in both of our lives! 

*Apologies to long time client George Thomas for making a positive Duke reference. I hope you’ll forgive me.

**This is the same book featured prominently in the hit show The Bear (season 2).

One of my favorite parts of my job is talking to our clients about their goals. Sometimes their objectives are specifically related to money; at other times, not as much. Either way, understanding where clients want to go (their goals) allows us to help them get there (through careful planning).

In my family’s case, one goal we have set is to see our hometown St. Louis Cardinals play in a different city each summer. This is usually my favorite yearly trip. A few weeks ago, we had an opportunity to go to Chicago to see the Cardinals play the White Sox. We spent time on Michigan Avenue, Navy Pier, and other “tourist” spots. We were also fortunate to see our Cardinals pull out a 3-0 victory.

This year’s trip was especially memorable because we combined it with visiting some of our favorite long-time clients, Larry Baumann and Dana Brehm. While not from Chicago, Larry and Dana made it their goal years ago to have a place in Chicago. After they both retired, they realized that goal and have a beautiful home there.

Numerous studies have shown that making your goals known to others increases your odds of achieving them. We love doing our part in helping clients achieve their goals. And if you aren’t tracking your goals, please let us know. We’d be happy to help.