SxSW: The Wisdom of Crowds

by Luke Wroblewski March 11, 2006

Part two of the decision-making discussions at SxSW2006 featured James Surowiecki discussing the Wisdom of Crowds. Contrary to common belief, James argued that under the right circumstances groups of people could be smarter than expert individuals at making the right decision.

James began by walking through several examples of collective intelligence in action: crowd voting on Who Wants to be a Millionaire (the audience is 91% right vs. 60% right for individual “life-lines”); Google’s PageRank; the stock market (90% of money mangers perform worse then the overall market); and the collective opinion of attendees at the race track almost always picks the winning horse.

The reason collective intelligence can arrive at a good decision is that every individual in the group has some piece of information about the solution as well as some misconceptions or incorrect assumptions. When put together, each individuals errors fall off and their unique perspectives combine to create the right answer. There are, however, circumstances that need to exist for the wisdom of crowds to work effectively.

  • Bottom Up: Everyone must have an equal say. The group’s decision must represent the true collective judgment of the group.
  • Diversity: Not from a human factors perspective but cognitive diversity (different approach tools, perspectives, etc.). Diversity expands the range of possible solutions and helps a group think more clearly.
  • Independence: Individuals within a group need to make judgments based on their own knowledge not on the ideas of others. Most group decision-making fails because there is too much of a focus on consensus. Instead of tapping into the intelligence of each individual, you are trying to find the lowest common denominator that everyone agrees to.
  • Lack of Imitation: Human beings are natural imitators -it helps us learn. But imitation is problematic -it makes it hard to tap into collective intelligence.
  • Peer Pressure: Most of us are very concerned about reputation. We look at our peers and do what they do. "Better to fail conventionally; than to succeed unconventionally."

The Internet represents a tremendous opportunity for harnessing this type of collective intelligence because it can tap into the knowledge of many people. In summary, James pointed out that our society is at an interesting point. We are heavily invested in the roles of experts and individual leaders yet at the same time seeing bottom-up decision-making enabled more and more. The wisdom of crowds can help remove some of our dependence on experts who often do not realize their own biases. A wide net (enabled through the Web) can enable the blind spots of experts to fade away.