November 7th, 2008
Crowdsourcing, Wikinomics and the Wisdom of Crowds
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In 2004, James Surowiecki wrote his brilliant book The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations and argued that a diverse collection (crowd) of independently-deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts.
Specifically, he says that the wisdom of crowds is great at solving three types of problems — cognition problems which involve identifying a correct definitive answer, coordination problems which involve synchronizing our individual activities with others, and cooperation problems which involve acting together despite our self-interest.
However, for the wisdom of crowds to work, four basic conditions need to be met — diversity of opinion to bring in different information, independence of members from one another to avoid the herd mentality, decentralization so that people’s errors balance each other out, and a good method for aggregating opinions to distill the wisdom from the crowds.
Therefore, the wisdom of crowds fails when groups are too homogeneous, too centralized, too divided, too imitative or too emotional.
