THE  WISDOM  OF  CROWDS

 

Types of crowd wisdom

 

• Cognition

Thinking and information Processing

Market judgment, which can be much faster, more reliable, and less subject to political forces than the deliberations of experts or expert committees.

• Coordination

Coordination of behavior includes optimizing the utilization of a popular bar and not colliding in moving traffic flows.

• Cooperation

How groups of people can form networks of trust without a central system controlling their behavior or directly enforcing their compliance. This section is especially pro free market.

Four elements required to form a wise crowd

Not all crowds (groups) are wise. Consider, for example, mobs or crazed investors in a stock market bubble.

The key criteria separate wise crowds from irrational ones:

Criteria	Description
Diversity of opinion	Each person should have private information even if it's just an eccentric interpretation of the known facts.
Independence	People's opinions aren't 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 judgments into a collective decision.

 

Failures of crowd intelligence

The crowd produces very bad judgment, and argues that in these types of situations their cognition or cooperation fail because (in one way or another) the members of the crowd are too conscious of the opinions of others and begin to emulate each other and conform rather than think differently.

Although experimental details of crowds collectively swayed by a persuasive speaker, the main reason that groups of people intellectually conform is that the system for making decisions has a systematic flaw.

What happens when the decision making environment is not set up to accept the crowd, is that the benefits of individual judgments and private information are lost and that the crowd can only do as well as its smartest member, rather than perform better.

Detailed case histories of such failures include:

Extreme	Description
Homogeneity	The need for diversity within a crowd to ensure enough variance in approach, thought process, and private information.
Centralization	The Columbia shuttle disaster, on a hierarchical NASA management bureaucracy that was totally closed to the wisdom of low-level engineers.
Division	The United States Intelligence Community, the 9/11 Commission Report claims, failed to prevent the 11 September 2001 attacks partly because information held by one subdivision was not accessible by another. The crowds (of intelligence analysts in this case) work best when they choose for themselves what to work on and what information they need. The Office of the Director of National Intelligence and the CIA have created a Wikipedia-style information sharing network called Intellipedia that will help the free flow of information to prevent such failures again.
Imitation	Where choices are visible and made in sequence, an "information cascade" can form in which only the first few decision makers gain anything by contemplating the choices available: once past decisions have become sufficiently informative, it pays for later decision makers to simply copy those around them. This can lead to fragile social outcomes.
Emotionality	Emotional factors, such as a feeling of belonging, can lead to peer pressure, herd instinct, and in extreme cases collective hysteria.

 

Connection

The question for all of us is, how can you have interaction without information cascades, without losing the independence that’s such a key factor in group intelligence?

• Keep your ties loose.
• Keep yourself exposed to as many diverse sources of information as possible.
• Make groups that range across hierarchies.