Is the Greek referendum the ultimate test of crowd wisdom?

Wow! So the people of Greece are taking back control of their future. The referendum is crowd wisdom governance and that is how the nationӳ economic future will be decided next week. How’s that for trusting crowd wisdom? Is it a wise decision? Time will tell. In the meantime, let’s see what we can learn from the most interesting crowd wisdom field experiment in history.

Step back. Greece is in debt. 370 billion to be exact. The country’s creditors have refused funding to save Greece from defaulting on a 1.6bn IMF repayment. On 5 July 2015, a referendum to decide whether or not Greece should accept the fiscal measures proposed by the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB), will take place. The Greek prime minister Alexis Tsipras announced the referendum in the early morning of 27 June 2015, and parliament ratified the move the next day. Although Prime Minister Tsipras is a fierce ‘nay’ opponent, he has decided to entrust the decision to the people and excuse himself of the huge responsibility involved.

Prime Minister Tsipras has given us an unprecedented opportunity to witness crowd wisdom in action. Is the Greek crowd wiser than its government? Can it be as responsible as a committee of senior monetary and financial experts? Can it distill the diverse set of social forces, geo-political ramifications, academic research and policy recommendations into a simple, responsible decision with a positive outcome?

One cannot exaggerate as to the gravity of the issues at stake. On the one hand rejecting the European Proposal will most likely result in Greece dropping out of the Eurozone, to be likely followed by economic pandemonium. However with that comes the hope for Greece to regain control of its own destiny while maintaining its social and national integrity. On the other hand, accepting the deal would mean imminent and profoundly negative effects on the lives of many Greeks, especially for the elderly and less fortunate. Greece would be forced to abruptly deal with its core economic weaknesses – widespread corruption, low worker productivity and a high dependence on social welfare – all in conjunction with unprecedented unemployment and general economic uncertainty.

Supporters believe the choice is accept the deal or die. Detractors claim the proposed deal would kill all possibilities for actual rehabilitation. No one knows, and it is keeping the elite economists and politicians of the continent awake at night. Now the crowd is going to make this decision and vote either ‘yes’ or ‘no’ on the specific question of whether to take the deal or not.

Can taxi drivers, hair dressers, dentists, teachers, factory workers, college students and everyone else collectively make better decisions than the government? Let’s examine the signals and history.

Initial crowd sentiment to the referendum was extremely negative. World markets tumbled and the Greek Stock Market is suspended until further notice. High cash withdrawals have prompted Tsipras to announce a ‘Bank Holiday’ to be in effect until July 7th at the earliest.

Surprisingly though, opinion polls show most Greeks support the agreement. In a poll conducted by Alco for the Greek newspaper Proto Thema, 57% of the participants said they would vote ‘yes’ in the upcoming referendum, in favor of a deal. Another poll conducted by Kapa Research for Ҕo VimaҠfound that 47% of the population will vote in favor of approving the agreement, while 33% will vote against.

It’s very insightful to look to the betting markets for indicators. Memories are still fresh of March’s Israeli election and last year’s Scottish independence referendum, when the betting sites were right and the opinion polls were way off. In Israel, 2 weeks before the elections, while opinion polls where all favoring the Labor Party, 81% of gamblers were betting on Netanyahu to come through as the victor. In Scotland, while most opinion polls were split down the middle, political betting lines have unanimously experienced much higher “NO” volumes. In this case the current betting jury is out. Predicit is leaning towards a 2015 EuroZone exit while other betting sites are pointing at no EuroZone exit anytime soon.

History shows there is a big difference between how people classify themselves politically and what they actually support in times of crucial decision making. Tsipras’ anti austerity Syriza party won the the election handsomely five months ago, but here we are with Tispras himself, the most vocal detractor of the proposed agreement, passing the buck back to the populace. Yet the crowd itself may surprise everyone and prove itself as the responsible adult on the block.

How do you think the Greek crowd will vote on the referendum?

Pono Music: Herd or Intelligence?

A Giant Rockstar turned into a Pied Piper, A Herd of Intelligent Investors that followed him blindly, the writing that was all over the wall and a tiny portion of sensitive listening that could have made the difference. Oh yes, there’s a world hunger angle to it as well.

Neil Young’s Pono Music was the hottest equity crowdfunding investment of late 2014. Yes, Neil Young. The immortal titan of music Neil Young. The passionate anti-world hunger evangelist, Neil Young. The same Neil Young drove a herd of investors to finance a very special media player. So special that it promised superior sound qualities only dogs could hear. It also required a complete replacement of your entire music library, the culmination of a lifetime of music curation. The cost? A bit less that a compact Japanese pickup truck.

Pono Players

Makes sense?

No.

But in 2014 Pono Music ran two highly successful crowdfunding campaigns. The first became the the 4th highest campaign ever on Kickstarter and raked in over $6.2M in pre-orders and pledges. The second campaign was even more spectacular. This time investors were offered a portion of Pono Musicӳ shares using an equity proposition that tagged Pono with a valuation of $50 Million. Thatӳ right. $50M before a single device was delivered to the first happy customer.

Oh, and the second one turned to a phenomenal success as well. The $2.5 Million offer was oversubscribed and Pono Music raised another $6 Million in less than a week on CrowdFunder!

One year, post hype

A year later reviews are mediocre, sales are lagging and it wouldn’t be an overstatement to say that most Pono shareholders keep listening to music on their iPhones and Droids.

Hindsight is always 20/20, granted, that’s really no excuse for reckless investing. Could this all have been flagged at the get-go? Isn’t there a way to add some rhyme and reason to the fervor of ‘hot’ investments? The answer is an absolute yes. Turns out it wasnӴ even too difficult.

Pono music was the first investment we chose to crowd review. A year ago we hadnӴ yet written a single line of code nor had we raised a single dollar for our new venture Zirra. What we had in mind was an understanding that crowd wisdom could be super effective in rating start ups. We chose a few anchor investments, gathered 400 crowd reviewers and asked them 25 questions each. The results were stunningly accurate, so accurate that I still look at the original reports at least once a week to get inspired. Here are select sentiments and comments our crowd shared during the very peak of the funding campaigns.

ԉ am a sound engineer, the human ear wonӴ detect the differenceԼ/strong>

ԉ just calculated it would cost me $9,500 to replace my current iPhone media libraryԼ/strong>

Ԕhis will take advantage of the sentiment of older music lovers, will never break mass marketԼ/strong>

Ԕhe core niche will be enthused, but the illusion will hit a glass ceiling very quicklyԼ/strong>

ԉf we apply a ԍooreӳ lawԠequivalent then in less than 2 years Droids and iPhones will catch up with their technologyԼ/strong>

ԗhy is Neil Young camouflaging what is otherwise a tech thing?Լ/strong>

The Zirra crowd has given the product a score of 6.3 out of 10. The founding team received an 8.3. The market potential has been graded a 4.9 and the overall investment was rated with a mediocre 6.2. Nothing like the hype.

75% would not invest in any circumstances. 12% would invest for a different share price. The other 13%? Well, vinyl aficionados.

The overall sentiment was very clear: over hyped, overpriced device, content & stock, highly questionable ability to deliver on its promise, niche play, more likely to underperform.

It didn’t require an analyst nor a super expensive due diligence process. All it required was the right crowd, a good set of eyes and ears and the willing to listen. It doesn’t mean Pono Music will not eventually become a great success. It does mean, however, that the crowd is worth listening to. Oh, and at that point I knew we were onto something big.