Wisdom of Crowds: Post #4--Decentralization

Decentralization: By not predicting Pearl Harbor or terrorist events like 9/11, US intelligence agencies have been roundly criticized. In particular, the FBI was beaten up after 9/11 because in hindsight there had been many hints that the attacks were imminent. That very same criticism was made of the CIA about Pearl Harbor. We just can’t stand that we can’t predict the future! The big criticisms of the CIA, the FBI, NSA, and other intelligence agencies was the lack of centralization for decision making. The author argues that decentralization is the key to success, not its Achilles heel. What is core and missing is how to aggregate the diverse, decentralized experts, so that the wisdom of these very smart folks can be brought to bear on the decision-making process—which we know is geometrically better than centralized, homogenized thinkers. On this one, Congress and the president need to take heed.

Wisdom of Crowds: Post #3--Diversity

Diversity: Engage a group of Marines, housewives, engineers, and dog catchers to address a public policy and you’ll get a much more robust decision than with a bunch of politicians sitting around a table. Why? Diversity of experience (cognitive diversity) and knowledge when aggregated tend to come up with better decisions. In fact, diversity begins to act like a “market” which makes far better decisions than individuals or homogenous groups. This cognitive diversity means that by adding people to the decision-making team who know less than experts but who bring different skills and perspective actually improves the group’s overall performance. Diversity ensures that alternative perspectives are brought to bear on the issue that might otherwise get lost. And the smaller or more formal an organization, the more important the power of diversity is to the process because it lacks the power and magnitude of a large market. All this is to say that a wise, diverse group will outperform a CEO anytime.

Wisdom of Crowds: Post #2--Independence

Independence: We’re all aware of peer pressure. In research, it’s called social proof and has been studied for many years. Whether the experiments were people pointing at the sky (the more people pointing at the sky, the more people stopped and looked up) or whether it’s a rush to buy an iPod because everyone around you is, this gets to the heart of the phenomenon of independence. While groups, especially cascading groups (based on early adopters convincing others to come along for the ride), who move toward iPods or Starbucks often make decent decisions, they’d make far better ones if they decided things as a group—but independently! Often groups make decisions sequentially. Think about how what you say in a group might depend on what your colleague or boss might say and how it could easily influence you. What if you collected data simultaneously and anonymously?