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Joel Greenblatt's jelly bean jar: the crowd was 5 off until it heard each other
At a talk, investor Joel Greenblatt had 100 people privately guess the beans in a jar. The average was 1,771 against an actual 1,776, but when guesses were called out loud the average fell to about 900. His lesson: investors do best when they value a business on their own instead of anchoring on the news and the ticker.
“When they all said their guesses out loud, they went from being off by 5 to being 50% off. The average, I think, came down to like 900 or something like that. So they were off by a mile now. Same people, same jar, The only thing that changed was hearing what other people thought. And he gave this example. He goes, this is the stock market.”
Steal thisWrite down your own valuation before you read the news or look at the price.
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