Rob Webb – RobWebb2K – Markets, Information, Technology, Law

Last week, the Washington Post ran an interesting article by Cass Sunstein on Wikipedia. Sunstein is a tenured professor at my law school and is often referred to as the most cited living legal scholar, although I think Posner might have him beat. The article leads with a great stat:

In the past year, Wikipedia, the online encyclopedia that “anyone can edit,” has been cited four times as often as the Encyclopedia Britannica in judicial opinions, and the number is rapidly growing.

The article pulls much of its content from Sunstein’s most recent book Infotopia, which analyzes wikis, future markets, and crowd wisdom in a variety of arenas. I’m reading it and it’s great so far, although I think the article in The Post probably pulls the most salient points. I will put up a full review of the book when I have completed it. The most interesting thing I have gotten to so far is his statistical analysis of prediction markets and when they work and when they don’t. In short, they work nearly perfectly when the average respondent is more likely than not to be correct. As the number of respondents increases, the more accurate the market prediction will be, so long as each participant has on average more than a 50% chance of being correct. This is why prediction markets work for things like internal corporate polls about product releases but fail for stuff like Supreme Court nominations.

The beauty of the small size and intense focus of my law school is that Sunstein was one of my professors during my first quarter of my first year and I was lucky enough to have Epstein the following quarter as well. Both are brilliant and wonderfully quirky. Sunstein would always start each class with a 10 minute recap of what was discussed in the previous class and everyone would pound on their laptops to capture every word. Then he would launch into the new discussion for the day and the typing would quickly taper off, replaced by intense focus trying to follow him from point to point. He would cold call about five people every day and I bet 20% of the people called on in that class had any idea what was going on when they answered him. Definitely some of the hardest thinking I have ever done.