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03.16.06


SXSW: Wisdom Of Crowds

By Christopher Carfi

James Surowiecki, who wrote The Wisdom of Crowds, talked about the concepts in his book.



Three examples of the phenomenon:

  • Race tracks


  • Jellybean counting


  • Guessing the weight of a cow


  • In "wise crowds," there are typically a few experts, a few people in the middle, and lot of people who individually have a high rate of error.

    Yet...if you take the average of all the "guesses," the average is usually a very good approximation...in some cases, within a few percent (3%-5%) of the actual value. Surowiecki: "Results of the market map almost perfectly onto the outcomes of events."

    There are a number of examples where the "collective guess" has provided good results:
    • Siemens (what will be the market lifespan of a product?)


    • Google (how many users with GMail have after three quarters?)


    • Eli Lilly (which drugs will make it through clinical trials?)
    Why does this work?

    Everyone participating in these markets has "some" idea of what the answers will be, but they also have biases.

    However, this doesn't always work. For this to work, it requires three things:
    • Some form of aggregating peoples' judgements


    • Diversity


    • Independence
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    Why is diversity important? Wise crowds need cognitive diversity... difference in frames of reference, tools used to solve problems, etc. It simply expands the range of information that is available, and avoids the hurdles and obstacles that a single individual may run in to. Diversity helps to even out the blind spots and biases in a crowd...and the biases and blind spots of "experts" as well.

    The phrase "collective intelligence" is being used extensively to capture this concept.

    Diversity also helps in get around peer pressure. Story is told of peer pressure in psychological experients, as well as examples of "groupthink."

    Read the rest of the article.


    About the Author:
    Christopher Carfi, CEO and co-founder of Cerado, looks at sales, marketing, and the business experience from the customerīs point of view. He currently is focused on understanding how emerging social technologies such as blogs, wikis, and social networking are enabling the creation of new types of customer-driven communities. He is the author of the Social Customer Manifesto weblog, and has been occasionally told that he drives and snowboards just a little too quickly.

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