James Suroweiki – Wisdom of Crowds

Suroweiki explains the wisdom of the crowds. He recounts,

“At a 1906 country fair in Plymouth, eight hundred people participated in a contest to estimate the weight of a slaughtered and dressed ox. Statistician Francis Galton observed that the median guess, 1207 pounds, was accurate within 1% of the true weight of 1198 pounds.[4] This has contributed to the insight in cognitive science that a crowd’s individual judgments can be modeled as a probability distribution of responses with the mean centered near the true mean of the quantity to be estimated.” (Introduction)

He explains that

“The market was smart that day because it satisfied the four conditions that characterize wise crowds: 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), and aggregation (some mechanism exists for turning private judgments into a collective decision).” (8)

The collective wisdom of individuals, he argues, is more accurate at forecasting than even the smartest individual.

Why do groups make bad decisions? (e.g. a stock market bubble?)

“People don’t challenge the status quo — People, side with Keynes who wrote “in The General Theory of Employment, Interest, and Money, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”” (48-49 )

How can we improve collaboration? “When the pressure to conform is at work, a person changes his opinion not because he actually believes something different but because it’s easier to change his opinion than to challenge the group. (36) Instead, create meetings that do not have power positions. He advises, “One key to successful group decisions is getting people to pay much less attention to what everyone else is saying.” (63) For example, have participants read and comment on a shared Google Doc before a meeting. Use the meeting to discuss and argue the merits of each others ideas.

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