The Wisdom of Crowds

James 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!
Dont let anyone look at your estimate!

Winner will get to keep the bag of skittles.

So How Much?!

???

Surowieckis 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 persons
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
Lupas!

Sweet Engines!
We need a solution to decide
what type of coffee I should get
tonight!
Common Grounds!

Harvest!

Starbucks! PSL
all the way!

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