The Wisdom of Crowds
How Collective Intelligence Outperforms Individual Expertise
How many jelly beans are in this jar? The crowd might know better than you do.
I haven’t had a chance to read Wisdom of Crowds yet by James Surowiecki but an article in Building43.com was very interesting. It shows that collectively a crowd/group’s mind is better than your own when trying to solve a problem or answer a question. Check this out…
The Columbia Business School Experiment
In 2007, Michael Mauboussin presented a big jar of jelly beans to his 73 Columbia Business School students. How many beans did they think it contained? Guesses ranged from 250 to 4,100; the actual number was 1,116. The average error was 700 — a massive 62 percent — demonstrating that the students were awful estimators.
Now here comes the weird part. Even with all these wildly incorrect guesses, the average guess was 1,151 — just 3 percent off the mark. Not only that, only 2 of the 73 students guessed better than this group average.
So, although individually everyone was woefully inaccurate, collectively the group was incredibly accurate.
A Proven Phenomenon
Was this a fluke? Hardly. The experiment was made famous in 1987 by Jack Treynor. In his case, it was 850 jelly beans and 56 students. The group estimate was 2.5 percent off; only one student guessed better. The study has been repeated many times since with similar results.
Treynor’s Results (1987)
Visualizing the Phenomenon
Individual guesses vary widely (gray dots), but their average (black line) falls remarkably close to the actual value (gold line).
Why This Matters
Decision Making
Group input can lead to better decisions than relying on even the smartest individual.
Market Predictions
This principle helps explain why prediction markets and polling aggregations often work.
Team Dynamics
Diverse teams with varied perspectives may outperform groups of similar experts.
WISDOM
OF CROWDS
About the Book
In The Wisdom of Crowds, James Surowiecki explores how the aggregation of information in groups results in decisions that are often better than could have been made by any single member of the group.
The book shows that under the right circumstances, groups are remarkably intelligent and often smarter than the smartest individuals within them. This counterintuitive notion challenges our tendency to seek out expert opinions rather than collective wisdom.