[extropy-chat] Wisdom of Crowds

[BillK]

On 5/15/06, "Hal Finney" wrote:
<snip>>
> But more fundamentally, according to a book I've read recently, The Wisdom
> of Crowds (a phrase Kurzweil used quite a bit) by James Surowiecki, there
> is something of a paradox in human estimation ability.  Individually we
> tend to be highly overconfident.  But, collectively, our estimates
> are often extremely good.  Surowiecki describes classic examples like
> guessing the weight of a pig, or the number of jelly beans in a jar.
> Collecting guesses from a crowd and averaging them, the result is usually
> right to within a few percent.  Often the crowd's result is closer than
> any individual guess.
>
> Surowiecki sees this phenomenon as being behind the success of such
> institutions as futures markets, including idea futures.  The reason
> these institutions work is because they are successful at aggregating
> information from a diverse set of participants.  Surowiecki emphasizes the
> importance of diversity of viewpoints and describes a number of studies
> showing that, for example, ethnically diverse juries do a better job.
> He also describes several traps that can arise, such as a copycat effect
> where people are polled publicly and sequentially for their guesses,
> causing later participants to amend their mental estimates to fall into
> line with the emerging consensus.  Markets are sometimes vulnerable to
> this but at least the financial incentive is always there to encourage
> honesty.
>
> The bottom line is that the wisdom of crowds is one of the best guides
> we have to the future, and so when people refuse to make guesses because
> they have recalibrated themselves into a mental fog, they are no longer
> contributing to the social welfare.  It's much better, when being polled
> like this, for people to try to cut through the uncertainty and find that
> "50%" point where they feel they are as likely to be too low as too high.
> If they can do that, and avoid being influenced by the guesses of those
> who speak before them, and if the group is reasonably diverse, you can
> get about as good an estimate as you're going to get.  I would have liked
> to have received that estimate, and would have found it one of the most
> valuable pieces of information I took away that day.
>


This very popular book may be exaggerating the benefits of popular opinion.

It is correct to claim that the crowd *sometimes* can be a useful
predictor. But to get a good result you have to be very careful about
the selection of the crowd, the selection of the possible results, and
control of the crowd behaviour.

Michael Shermer reviewed this book in Dec 2004
<http://www.sciam.com/article.cfm?chanID=sa006&articleID=00049F3E-91E1-119B-8EA483414B7FFE9F&colID=13>

Everybody can think of cases that disprove the wisdom of crowds.
Surowiecki mentions some of them in his book. Earlier books have put
the opposite case. Mackay's 'Extraordinary Popular Delusions and the
Madness of Crowds' include the well known tulipmania phenomenon.
Canetti wrote 'Crowds and Power' with the shouts of Hitler's Nuremberg
rally figuratively ringing in his ears.  Also sociologists such as
Gustave Le Bon, in his classic work The Crowd: A Study of the Popular
Mind: "In crowds it is stupidity and not mother wit that is
accumulated."
Lynch mobs are another example.

Surowiecki makes a major point of the stock market's reaction on
January 28, 1986, the day the space shuttle Challenger exploded. Of
the four major shuttle contractors--Lockheed, Rockwell International,
Martin Marietta and Morton Thiokol--the last (the builder of the
defective solid-rocket booster) was hit hardest, with a 12 percent
loss, compared with only 3 percent for the others. Given four
possibilities, the masses voted correctly.

But the next shuttle disaster supported the opposite conclusion.
"Herding" can be a problem when the members of a group think uniformly
in the wrong direction. The stock market erred after the space shuttle
Columbia disaster on February 1, 2003, dumping stock in the booster's
manufacturer even though the boosters were not involved.

The crowd tossed a coin and came up right once and wrong once.


As Shermer says:
For a group to be smart, it should be autonomous, decentralized and
cognitively diverse, which the committee that rejected the foam-impact
theory of the space shuttle Columbia while it was still in flight was
not. In comparison, Google is brilliant because it uses an algorithm
that ranks Web pages by the number of links to them, with those links
themselves valued by the number of links to their page of origin. This
system works because the Internet is the largest autonomous,
decentralized and diverse crowd in history, IMHO.
------------------

So, just ask Google, they know the answer to everything!   :)
(assuming they fix their recent search problems).


BillK