Friday, September 12, 2008

The Wisdom of Crowds or the Widsom of One

This is a great story that was sent to me by a co-worker at Best Buy (thanks Big Swede!) in the context of poking a bit of fun at the concept of "the wisdom of crowds". For those of you who have not read the book, the premise is that crowds more acurately predict outcomes more often than any one individual can. That is because the collective intelligence, or networked intelligence, is smarter than the intelligence any individual possess. This is particularly true as you move up in organizations and the information that you receive is filtered multiple times, for better or worse. This is essentially an efficient market theory. We all know that it works most of the time, but there are incidences where the market is egregiously wrong, such as the Internet bubble. Now for the story.

There are two set ups on this story. First, Best Buy regularly experiments with tools to leverage the wisdom of the crowds. I fundamentally believe in the wisdom of crowds as I've seen it produce amazingly accurate results on several occasions. However, it is not a tool that can be used for everything. It requires human judgment in order to be effective. Second, rumors of a United Airlines bankruptcy were rampant this week on Wall Street. This story highlights how technology and the lack of a human filter contributed to the crowds being wrong. Enjoy.

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