Wisdom of the crowds – Can Web 2.0 help predict the future?

Posted on 26. Mar, 2008 by Dean Whitney in Uncategorized   and has   0 Comments

When we think of ‘crowdsourcing’ some of us think of leveraging crowds to do work like oDesk or Amazon’s Mechanical Turk, sites that help you outsource jobs globally. Another way crowds are leveraged is to allow companies create massive focus groups, garner fresh ideas, and even predict the future. Major brands such as Dell, Eli Lilly, Proctor & Gamble, Google, and Best Buy leverage collective insights to shape business strategies.

There are sites that provide this kind of functionality such The Industry Standard. a predictive marketplace (like the Hollywood Stock Exchange) where members track startups and technologies and place bets on which will succeed.

Another interesting model is Predictify. a prediction platform where users can predict the future and build a reputation based on their accuracy, and marketers can post questions to collect actionable, forward-looking data “from the crowd”. This can be a powerful tool for marketers. Some researchers claim the statistically crowd predictions given the right conditions out perform smaller groups and individuals.

The book The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, written by James Surowiecki, suggests the aggregation of information in groups, resulting in decisions that, he argues, are often better than could have been made by any single member of the group. He also suggests not all crowds (groups) are wise. Consider, for example, mobs or crazed investors in a stock market bubble. According to Surowiecki, these key criteria separate wise crowds from irrational ones:

  1. Diversity of opinion: Each person should have private information even if it’s just an eccentric interpretation of the known facts.
  2. Independence: People’s opinions aren’t determined by the opinions of those around them.
  3. Decentralization: People are able to specialize and draw on local knowledge.
  4. Aggregation: Some mechanism exists for turning private judgments into a collective decision.

So the question is “Are we really smarter than me”?