The Wisdom of CrowdsJames Surowiecki

Abel D. Betancourt, Jr.

BUSN 403

October 27, 2014

Skittles Challenge

Take out a piece of paper and write down how many skittles are in the plastic bag!

Don’t let anyone look at your estimate!

Winner will get to keep the bag of skittles.

So How Much?!

???

Surowiecki’s Main Points

• Groups do not need to dominated by intelligent people to be “smart”

• When imperfect judgments are added up in the right way, the collective

intelligence is often excellent

• Collective intelligence: the knowledge of the entire group

• Group-think: the concept that the masses are better problem solvers,

forecasters and decision makers than any one individual or elite few

3 Kinds of Problems That Affect

“Collective Intelligence”

• Cognition problems

• Problems that have definitive solutions

• Example: Seeing a person injured (best option is to call 911)

• Coordination problems

• Group must try to coordinate their behaviors, knowing that everyone else has the same goal

• Example: Working on a group presentation and everybody gets the same grade

• Cooperation problems

• Encouraging distrustful people to work together

• Example: 9/11

Four Conditions of a “Wise Crowd”

• Diversity of opinion

• Each person should have private information and own interpretation of known facts

• Independence

• YOUR opinion is not determined by the opinions of OTHERS; freedom

• Decentralization

• People are able to specialize and draw on local knowledge

• Aggregation

• Varying opinions can provide a solution more likely to be smarter than the smartest person’s answer

Diversity

• Grouping only smart people does not work well

• Smart people are similar to each other

• Hard to keep learning

• “They spend too much exploiting, and not enough time EXPLORING”

• Adding people who know less, but different, improves the group performance

• Introduce a radical or unlikely idea

• Better, robust forecast and decisions than the most skilled “decision maker”

Diversity

IDEA!

IDEA!

IDEA!

IDEA!IDEA!

IDEA!IDEA!

IDEA!

IDEA!

IDEA!IDEA!

IDEA!

IDEA!

IDEA!

IDEA!IDEA!

Independence

• Smart groups are made up of people with diverse perspectives who are able to stay independent of each other

• “Independence is important to keep the mistakes people make from becoming correlated.”

• Example: Skittles experiment

• We fall into “hearding”

• The tendency to assume that if lots of people are doing something or believe something, there must be a good reason why.

• Due to fear of being seen as “crazy”

• Stop being sensible

• Encouraging people to make incorrect guesses actually makes a group smarter

Independence

DISCLAMER: THIS PICTURE WAS TAKEN MANY YEARS AGO. I AM NOT THAT FAST ANYMORE.

Decentralization

• “Power does not fully reside in one central location, and many important

decisions are made by individuals based on their own local and specific

knowledge.”

• The closer a person is to a “problem”, the more likely he or she is to have a

good solution.

• Due to our specialization, we become productive and efficient and increases the scope

of diversity

• Perfect opportunity for communication and collaboration

Decentralization

“We need a solution to decide

what type of coffee I should get

tonight!”

Sweet Engines!

Harvest!

Lupas!

Starbucks! PSL

all the way!

Common Grounds!

Aggregation

• Coming together with a solution

• Able to witness that the results of the solution came perfectly well than with

the results of a group of geniuses alone

What did the I get out of this book?

It is possible to describe how people in a group think as a whole

Groups are more intelligent and often smarter than the smartest people

There is no need to chase the expert