Wisdom of the Crowd or Stupidity of the Masses

When to use what as a business leader.

Recently many forms of crowd sourcing have moved into the mainstream. It has also become understood that innovation is a collaborative process and companies have aimed to take advantage of this. Group intelligence is therefore on the rise. But what does the science say about this – we know that groups can collectively make better decision than experts, but they can also move as mindless herds with terrible consequences. This month I break down when crowds can be wise and stupid.

The Wisdom of Crowds was a bestseller published in 2004 by James Surowiecki in which he outlines the multiple examples and conditions under which crowds can show extraordinary wisdom.

This was famously noted by Galton, founder of the modern IQ test, a century earlier in a seminal article Vox Populi. Here Galton describes analysis of a competition at a farm animal auction whereby participants paid sixpence to take part in a competition to guess the weight of a prize ox with other attractive prizes at stake. What he found was that the mean of the participant guesses was within 1% of the actual weight. What was also surprising was this was despite very large variances of guesses. The audience was a general audience but could also have been considered an expert audience – they were after all at an animal auction so must have had some experience with animal weights.

This effect is also known in the popular and long-running television series Who wants to be a Millionaire where participants attempting to answer questions can use a number of jokers one of which asks the audience. This option almost always turns out to be the correct answer. This wisdom of the crowds has also been famously quoted by Larry Page of google saying that groups of smart agents combined with not-so smart agents always outperforming groups of smart agents alone.

This then suggests that large groups of individuals can always be smarter than experts, or at least as good as. But it is this is always the case? No, it is not. On closer inspection we can see there are multiple conditions and contexts for this to be the case.

The counter side is the stupidity of the masses and here we can see many examples, stock market bubbles, voting for Donald Trump, spending time on social media when we could be saving the planet. So, we also know that collectively groups of individuals can make terrible decisions. Some interesting and maybe baffling research by Sasaki in 2013 showed that when making simple choices collective decision making can be worse! Admittedly this piece of research was in ants but they, specifically, have excellent group decision making - normally. In this experiment ironically it was the simple decision that was the worst, and this was because of social influence. Another counter argument is the argument of group think which has been shown to lead to catastrophical decisions with collective group decision-making (albeit in smaller groups).

The first question then is when do we have wisdom of the crowds and when do we have stupidity of the masses?

The second question then, and an important one, is when and how should we be tapping into this in business?

If we know we have wisdom of the crowds, why do we not let the workforce be involved in corporate decisions? Indeed, why do we still need leaders and experts to make critical decisions if the masses can make better and more accurate decisions?

This is why Surowiecki defined the conditions under which wisdom of the crowds can be more effective and when it cannot:

1. Diversity of opinion – each person should have their own information and interpretation of the facts (even if eccentric)

2. Independence – people’s opinions aren’t influenced or determined by those around them

3. Decentralization – people are able to specialise and draw on local and diverse knowledge

4. Aggregation – there is a way to collect this information and turn it into a collective decision

5. Trust – everybody has to trust that the collective group is fair

Point one is interesting and Davis-Stober et al in 2014 noted, “…a crowd becomes wisest when it is maximally informative, which entails that its members’ judgments are as negatively correlated with each other as possible, as opposed to being independent.” So maximising diversity is critical. This is important for business because if we are trying to tap into the wisdom of crowds, we need a very diverse crowd.

Point two is also important because in the real world we are influenced by many factors. This is why wisdom of the crowds does not hold in the political space, we may have diversity of population, but we have entrenched opinions and multiple actors trying to influence people’s opinions. With no independence we also risk herd mentality, when everyone collectively makes the wrong choice.

Social influence

In the online space we are constantly influenced by likes and ratings by third parties. The problems is these exert an influence and social ratings, though seemingly a good idea, that could and should tap into the wisdom of the crowds doesn’t. Some interesting research in 2008 (Salganik and Watts) looked at ratings of music. The beauty of this experiment is it was large and it split participants into different “universes”: one with expert opinion guiding music choice, no opinion, or one with social opinions visible.