Before I give you the reason why I said a strong yes to that
question, I want you first to imagine that you already won this game of life. Imagine that you are very successful financially with a very good relationship with your family and friends. Your financial state has given you the capacity to have a beautiful house, multiple properties and of course, the car of your dreams.
[Photo Credit: Pietro de Grandi]
Now that you are in this state, it is more than likely that you, your family and your friends are very fond of another luxury in life, quality wine. Years of tasting and trying different types of wine have trained your taste buds to pick only the best wine available. To help ease this meticulous wine choosing process, you need a trustworthy reference that would recommend and judge the right wine for you. One of the top wine competitions would be the California State Fair Commercial Wine Competition.
Judging wine is a big part of the wine industry. As a result of
this judging process, they give a gold medal for the wine that
produces the excellent taste, smell, texture and other factors that
that type of wine should produce. This would be the best wines.
Then they give a silver medal for good wine, the next lower level
would be the bronze medal, most of the wine will have no star if they perform poorly according to the judges. These medals are what will attract most of the customers and eventually enable the supplier of the wine to increase its price.
The very basis of awarding the medal depends on the Judges whom
we deemed as wine connoisseur, and with a lot of integrity. But, you may actually ask yourself, do these judges have a consistent judgment throughout the competition? Who judges the judges?
[Photo Credit: Burst]
It turns out, they did ask these questions. What they did to test
the judges is that they set up the competition where out of the 50
glasses of wine, 12 of these wine glasses will come from the same bottle of wine and the rest of the 32 glasses will be the usual entries to the competition. The assumption is that if the judges are consistent and with high integrity in their decision, their judgment on that 12 exactly the same wine would be very similar.
As a normal pessimist, you might have guessed that the judges made a mostly poor judgment on these 12 bottles. It turns out, you are right.
For a few of the 12 identical glasses of wine, a judge gave gold
medals. With the same judge, he also gave no medal
on some of the entries which have exactly the same wine! Only about 15% of the judges have a consistent judgment on the 12 identical wines. But! In the following year, this same set of 15% of the judge is again not consistent with their judgment.
If you notice, the point that I am trying to drive here is that the decision of a judge, that is supposed to have integrity, is very unpredictable. It is not even biased because when you say their judgment is biased, you can predict that they are biased positively or negatively. In this case, you can't really say their direction and essentially that is what we call the Noise in decision making.
In the same way as judging the quality of the wine, estimating
the price of a second-hand car is also greatly affected
by noise. Even if you feel that this person is already
seasoned in car dealing, it is safe to say that they are still influenced by the noise of decision making.
Noise can come from different things. It may be that on one or
two occasions, you are successful at selling this car at this
price. That would now be your main anchor point and you will
probably recommend cars at that same level. But we failed to know
that there are thousands of similar cars that are on sale for that
car. The decision can also be affected by your relationship with
that car expert. It might be that they have other motives, such as
gaining more profit, in prescribing the price of the car. Or they
just don't like you or adore you too much, that will also
affect how much price they would recommend the price for that car.
In engineering, one way to reduce noise is to average the data
points and the results would be the closest answer to the query.
They tested this idea by having a survey in the United States and
they asked the Americans, what percentage of airports in the whole
world are in the United States of America. It turns out that averaging the answer of the people who took the survey is very close to the actual answer to the question. This is what we call the Wisdom of the Crowd.
[Photo Credit: Connor
Going back to the question, is this price estimate accurate? Yes, because the wisdom of the crowd which came from all the similar car prices in the market is better than any other opinion of experts in the car dealership industry.
By getting the car prices of tens of thousand cars on sale in the Philippines we are developing the Wisdom of the Crowd to you through our car value calculator.
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