“crowds price information well until diversity collapses and returns appear”
Mauboussin and Callahan review the wisdom of crowds across prediction markets, sports betting markets, parimutuel betting markets, and the stock market, covering each market's history, accuracy, information aggregation mechanism, and failure modes. The key distinction: the three betting markets are zero-sum before costs, while the stock market has positive expected returns over time. Uses the framework to explain why markets efficiently capture known information and where diversity breakdowns create opportunities for excess returns.
No technical background needed