Surowiecki, J. (2005). The Wisdom of Crowds. New York: Anchor Books.
“Wisdom of Crowds”: Collective intelligence. Under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.
Boundedly Rational: Due to less information and limited foresight, we lack the desire to make sophisticated cost-benefit calculations and settle with a decision that seems good enough, rather than the best possible. (Herbert Simon)
Chasing the expert is a mistake, and a costly one at that. We should stop hunting and ask the crowd instead. But many don’t agree with collective intelligence and instead believe in only a select few to be smart enough.
* Cognition Problems: problems that have definitive solutions
* Coordination Problems: problems that require members of a group to figure out how to coordinate their behavior with each other, knowing that everyone is trying to do the same.
* Cooperation Problems: problems involving the challenge of getting self-interested, distrustful peopl to work together.
Conditions for the crowd to be wise:
* Diversity of opinion: each person should have some private information, even if it’s just an eccentric interpretation of the known facts
* Independence: people’s opinions are not determined by the opinions of those around them
* Decentralization: people are able to specialize and draw on local knowledge
* Aggregation: some mechanism exists for turning private judgmetns into a colelctive decison
The best collective decisions are product of disagreement and contest.
* Submarine “Scorpion” lost and found through average of collective guesses
* Who Wants To Be A Millionaire? crowd 91% of the time correct
* Students average guesses 94% correct
* Agents in maze averaged the same as the smartest individual’s steps
* Challenger disaster caused by company Morton Thiokol, as predicted by stock market (Mulherin)
* Gambling and betting on horses, NFL, etc. predicting outcome of game
* Google searches and displays by importance
* IEM poll for presidential elections; the percentage X is going to win = money you receive
* Hollywood Stock Exchange (HSX)
Decision Market: Method for capturing collective wisdom
My initial thought to this study was surprise that crowds could practically predict the outcome of certain situations. It’s somewhat hard to imagine that several hunches put together and averaged could come up with a close estimation of, for example, the weight of an ox. However, at the same time, it seemed to me that a lot of theoreticians had so little faith in the capability of the common man, claiming that there are only a very few number of people that are adept at any one thing. Regardless, the case studies presented were good examples of the wisdom of crowds, but while the crowd may be intelligent as a collection, I wouldn’t leave it up to the public to decide everything.
When connecting the wisdom of crowds to social media, I would imagine that utilizing social media to find a consensus of what the population is saying about different subjects, trends, etc. would be a possible way to predict certain future trends. The act of using Radian 6 to collect data suddenly seems more valid now…