The Top Pickers vs. the Pack
Thursday, October 19, 2006
James Acevedo is a "genius," though he admits no one at the elementary school in Ridgewood, N.J., where he teaches third grade, knows it.
But the Web site where he competes nightly, PicksPal.com, was so taken by his record at forecasting sporting events that it included him last month in a newly compiled list of 30 super-achievers culled from about 100,000 members and began selling their "genius picks" to the public.
"It's sort of self-gratifying to find that there's actually something to my gut feeling," said Acevedo, 26.
This new feature places PicksPal among a small number of Web sites seeking to turn the wisdom of the Internet on its head by sifting through its vast number of users to identify a handful of experts. If this novel approach withstands scrutiny, the reverberations could extend well beyond sports betting to include stock trading, popular culture and other realms.
For the past decade, much of the Internet has been animated by the "wisdom of crowds," the notion that the tremendous masses drawn to the Web can together provide collective knowledge that outperforms even that of experts. By marshaling the knowledge and tastes of millions of people, the Web has fundamentally changed the way people can gain knowledge about their world.
This group wisdom, for instance, underpins the link-analysis formula Google Inc. uses to rank search results. It influences the book recommendations offered by Amazon.com. It is also reflected in the votes of thousands of users who select the videos featured on YouTube, the articles showcased on the news aggregating site Digg.com and the ratings awarded movies on IMDB.com.
But this wisdom of the crowd could be outsmarted by what Michael Arrington, editor of the TechCrunch blog, recently dubbed the "wisdom of the few." Sites like PicksPal rely on input from the masses chiefly as a venue for auditioning prospective experts, on the theory that these virtuosos could provide even more accurate information and predictions than the crowd.
"If you figure out which ones did the best and get rid of the ones who have no idea, you'd do even better. Distill it down to the people who really know," Arrington said.
While generations have looked to pundits for guidance, it has often taken a long time for their expertise to be recognized, and many have remained in obscurity. Now the Internet promises new ways to discover those who might otherwise get overlooked. And it can do so with breathtaking speed. Some business professors remain skeptical, warning that luck can often be mistaken for expertise. But as more Web sites try to find ways to tap the expertise of smart people, a great debate is shaping up between two competing models for harnessing the human mind.
One pioneer of the wisdom of the few is Marketocracy, a site that has been recruiting Internet users to manage model stock portfolios and evaluating their performance for more than three years. Marketocracy tries to identify the top stock investors out of 55,000 users who manage portfolios by evaluating both their long- and short-term performance. Each month, the virtual portfolios of the 100 best investors are converted into a mutual fund that is sold to the public for real money.
"We think investing is a skill that's hard to find. When you find it, that's where you want to put your money," said Chief Marketing Officer Mark Taguchi. The fund has outperformed the S&P 500 in four of the five previous years and is roughly even so far this year.
Newcomer SocialPicks.com seeks to fare even better by combining stock picking with social networking. To develop a reputation as an elite stock trader, a user must not only demonstrate high rates of return and accuracy, but also post analyses that others deem to be exceptionally insightful, said chief executive Weiting Liu. SocialPicks is still being tested, with full release not expected for at least two months.