Okay. So crowdfunding is not just raising money from the crowd. It's also, in some sense, potentially learning from the crowd. If I'm investing in crowdfunding, I can potentially learn about the value of an investment from the demand coming in from other investors. When we talked about how the price that I'm paying, the price that I'm paying is not a market set price. It's an issuer set price. They just put their price of $10 or a share, whatever it is. They put it out there, you like it or not. So how do I learn about whether $10 is a reasonable price? Well, okay, I'm going to have to find out some other way. One of those ways is to observe the demand coming in from other people. Okay. So the issuers help you, they help you learn a potentially beneficial way from the crowd by setting a minimum. So you look at the offerings in a crowdfunding website. You'll see they've got a maximum, but they've got a minimum too. The minimum helps you in the sense that you can say, "Okay. Well, I'll put 2,000 bucks in this company." They've set a minimum of 50,000 bucks. So if they don't get at least 50,000 bucks in investment from everyone put together, the whole thing is going to be called off. I always get my 2,000 bucks back. So I know that when I say, "I'm investing 2,000 bucks," I'm not actually investing 2,000 bucks, unless there's that much other demand. So that gives me potentially a little confidence there, a little hope that, well, okay, maybe I got it wrong. Maybe this isn't such a great idea. But how wrong could I be if there's this total of 50,000 bucks coming in from other people? I've got the crowd, at least some kind of crowd, on my side if we crossed that 50,000 threshold. If we don't, well, then I just get my money back. So the investment simply never happens. So this is an example of at least banking on or hoping for the wisdom of the crowd that each person in a crowd knows something. If you could just put together all those different things that the people in the crowd know, that if you aggregate all of their information, then the aggregative information, it could actually be quite informative. So let's think about this now. This is not new ideas and old idea that there's wisdom of the crowds and collectively decision in general made by a crowd are better informed than the decision made by any one person in the crowd. This is a question that economists have thought about a lot. Let me just give you a sense of how economists think about this. I think the best context for me to think about this is actually outside of the financial markets and in the judicial world. So here's what I mean by this. Imagine you find yourself on a jury. You got jury duty, and so you go down to the courthouse. Then, by the end of the day, you're on a jury for a criminal trial. So it's 12 people, 12 jurors for a criminal trial. So you sit through the trial and you see all the evidence, all the testimony. Then, finally, closing statements, jurors are charged. They go to the jury room. Now, finally, they start discussing the case with each other. All right. So they discuss the case with each other. Then, at the end of the discussion, then they say, "Okay. Well, how about we have a vote?" They have a vote. Then think of the vote happening this way that you're going to do it by a secret ballot. You can do the votes different ways, but let's say, you're going to do it by a secret ballot. So everyone's going to write down on a piece of paper guilty or not guilty. Everyone tosses their vote into a hat. Then the foreman takes them out the the hat, reads them, counts them up. Then, if all 12 of you have voted guilty, well, then that's it. That's what it means for a jury to convict. All 12 you have voted guilty. That's what it takes. So let's say, you're sitting there, you've discussed it, and you have more than a reasonable doubt about the defendant's guilt. So you think reasonably that the threshold is here, but you have more doubt than that. So you think, "Well, okay. I have more doubt than just beyond a reasonable doubt. So I guess that means I should vote not guilty." I would say, just personally, I think yes, it does mean you should vote not guilty, but let's think about how you might think through this problem. This is the way economists have thought about this, and maybe we're worried a bit about the collective wisdom of the group of jurors. You might look at it this way that, look, I could vote not guilty and maybe in some sense, that's the right vote because I have that much doubt. But suppose I vote guilty. Suppose I vote guilty. Well, my vote of guilty does not actually convict the defendant unless all 11 other people also vote guilty. Now, I have some doubts about this case, but now, if you tell me that all 11 other people think this defendant is guilty beyond a reasonable doubt, and of course, I know that they know things that I don't know. They come from different walks of life. They have different perspectives. They maybe have their own ways of judging the credibility of witnesses and all that. So they know things that I don't know. I could know things they don't know. But there's 11 of them and one of me. So if all 11 of them think this person's guilty beyond a reasonable doubt, well, that contains information for me. That's going to lower my own doubt, and maybe it lowers my own doubt to the point where, actually, I don't have much doubt anymore, and I should now given that much doubt. I think guilty is the right vote. So what I'm saying is when I think, "Should vote guilty or not guilty?" I might be thinking, "Well, maybe I should vote guilty despite my doubts. Maybe I should vote guilty." Because the only situation in which it actually matters that I voted guilty, where that actually convicts the person, well, that's the state of the world, where all 11 other people think the person is guilty beyond a reasonable doubt. If that many people think that, well, then I think that too. So that kind of thinking could cause me to disregard my own doubts and then vote guilty when really, by rights, the right vote should be not guilty for me. So this is non-financial market here, but the point here is that the criminal justice system depends on this idea that when you have these 12 jurors that there's a wisdom of crowds here that well, we need all 12 people to think this is guilty beyond a reasonable doubt, that's what it takes to convict a person. But in that context, if all 11 other people are really sincerely voting guilty, only if that's sincerely they think, then to the 12 persons, it could be totally rational. I'm not saying this is ethical but totally rational to just go ahead and vote guilty. So it's not at all clear that the criminal justice system is really aggregating information quite the way we would think it is. I put this out to your own experience introspection. I mean, you've seen criminal trials. Do you think that the outcome of criminal trials is really such that all 12 people really thought this was guilt beyond a reasonable doubt, or maybe there's some of this free riding going on here? Some people are just voting guilty thinking, "Well, if everyone else thinks guilty, well, then I'm going to think guilty too. So I'll vote guilty even when I really ought to vote not guilty." So that's, of course, different context, but it helps us think about this idea of banking on the wisdom of crowds in this context. So for sure, it's a comfort when I'm thinking about putting $2,000 in that well, as you know, I only actually make the investment if other people have also pick this investment. But if I am just free riding here on other people's information, then how do we know they're not doing the same thing? How do I know that there's really no one here who has too much of information about this, and everyone's just hoping someone else knows more than they do? Maybe we're all crowdfunding. The wisdom of crowds makes the most sense when different people know different things. You're bringing different bits of information to bear on whether it's a good idea. Well, maybe there are situations where that's really true. Maybe there's other situations where, basically, it's really we all know the same thing, which isn't very much. So everyone doing the same thing doesn't really mean that much. They're not investing for different reasons. We're all investing for the same sketchy reason. So there's no more information in 1,000 people investing that way than one person because it's all the same scrap of information that we are banking on. So just to summarize this point, you do have some of this wisdom of crowds going for you in the crowdfunding context. But I think you want to think about a little bit about whether it's realistic in a situation you're looking at that the fact that other people are investing is telling you things that you don't already know, or could it instead be a situation where everyone is hoping that somebody knows something, and they think there's a wisdom of crowds and crossing a threshold when, in fact, there isn't.
