read my next post (should be up in a day or so and I think it has a good metaphor for this).

Groupthink can be rational. A group opinion is more likely to be right than my opinion, so it is rational to adopt the group opinion. But if everyone does this, it leads to information cascades, where an idea that gets a head start becomes entrenched even though nobody would believe it on their own.

Avoiding rational groupthink requires people to distinguish between their informed opinion, what they believe after hearing from the group (which should typically match the group opinion); and their naive opinion, what they would believe if they didn’t know the group opinion. The group consensus should be based on combining naive opinions rather than informed opinions. People need to reveal both and make clear which is which. They would still use their informed opinions to make decisions, but they need to also expose their naive opinions. (Unfortunately I can’t see how to apply this to markets, where only the informed opinion will guide people’s trades, leading to the familiar problem of bubbles.)

Emotional groupthink is where people try to punish those who depart from the consensus. I confess I don’t understand this part of the problem. But perhaps some fraction of groupthink is rational and could be addressed as I have described.

I haven’t read Robin’s tracts. He’s probably addressed the following. But I think you could have an option to pre-register publicly whatever bets you like. Whoever makes $10 million in one field publicly will start to be listened to, you can bet. Not to mention a billion. People with worse-than-average predictions are already incented to depart the prediction market because they lose money – eventually, anyway, though not immediately – and the best are already incented to dominate the market by putting more money in. Yet people will probably look to the opinion of such magnates as well as looking at the position of the prediction market itself, since the latter’s signal is slightly worsened by entries from people who haven’t decided yet whether they are consistently beating the average or not.

It’s like Warren Buffet. When Buffet says something about finance, business, or the economy, one might suspect what he says of possibly being self-interested. But suspect him as being full of hot air? Not likely to be true – at least not compared to just about anyone else.