People are notoriously bad at estimating expected value.

We've all seen those 10'x10’ self-storage units by the side of the highway on the edges of suburbia. If someone let you pick an abandoned one at random, what do you think the value of the stuff inside would be? NPR's This American Life explored that very question and followed the bidders on such auctions. Turns out the expected value is less than $500.

That seemed low to me at first (although most higher-value ones probably don't end up abandoned and on the auction block). But I quickly dismissed my doubt, because I have huge faith in the ability for markets to correctly price things that seem unknowable. I didn't realize how much faith I had until I heard this story and didn't doubt the assigned value for more than a moment.

This kind of group market intelligence is one of many fascinating dynamics explored in the James Surowiecki classic The Wisdom of Crowds.

Thought Partner: This American Life