The company website at Nokia, where I work, is always full of interesting things. Today there's information on how groups can make better decisions than individuals and mentions a book that illustrates this theory:
"The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, first published in 2004, is a book written by James Surowiecki about 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...
The opening anecdote relates Francis Galton's surprise that the crowd at a county fair accurately guessed the weight of an ox when their individual guesses were averaged (the average was closer to the ox's true butchered weight than the estimates of most crowd members, and also closer than any of the separate estimates made by cattle experts)."
Web links to this book led me to discover another book that I really must read on a similar subject:
Extraordinary Popular Delusions and the Madness of Crowds is a popular history of popular folly by Charles Mackay, first published in 1841. The book chronicles its targets in three parts: "National Delusions", "Peculiar Follies", and "Philosophical Delusions".
The subjects of Mackay's debunking include alchemy, beards (influence of politics and religion on), witch-hunts, crusades and duels. Present day writers on economics, such as Andrew Tobias, laud the three chapters on economic bubbles."
One of Mackay's chapters about bubbles describes the tulip bubble (similar to our housing bubble?):
"Among the alleged bubbles or financial manias described by Mackay is the Dutch tulip mania of the early seventeenth century. According to Mackay, during this bubble, speculators from all walks of life bought and sold tulip bulbs and even futures contracts on them. Allegedly, some tulip bulb varieties briefly became the most expensive objects in the world, until the bulbs bubble burst in 1637."
Wednesday, 23 April 2008
The wisdom and madness of crowds
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7 comments:
I hope that when people try and guess my weight they estimate the "true butchered weight;" that would probably shave off a few pounds of skin and cartilage, don't you think? :)
As for groups making better decisions than individuals, I'm not so sure. One of my favorite quotes is "a camel is a horse designed by a committee."
Yes, I agree with you bwj. Committee decisions always seem worse than individual ones but I thought I'd put the info up to see what people think. I was expecting Kaz to make a comment on this as she is v. knowledgeable on this subject.
I think (although I can't quote a reference) experiments have shown groups to make more cautious decisions than individuals.
Which is fine if the decision is a simple one.
When things get more complicated, groups tend to reach "compromises" and nothing significant ever gets done. You see this in the sclerotic processes of big companies.
I thought that William F. Buckley died! But here he is on this post, using a big fancy word like "sclerotic." Well! Have you run this by the Committee, Big Company Employee?:):) Might want to simplify (dumb down) your terminology so's not to hurt no feelin's and alienate the stoopid folkses like me...
Well, all tomfoolery aside, I loathe groups, committees, teams, and all such agglomerations---couple of years of Junior League was quite enough of that silliness, thanks very much. I suspect that women's civic groups aren't much different from corporate organizations...by the time you water things down so that everybody's happy, nobody's offended---well, you get a lame product every time.
I'm all for benevolent dictatorships...as long as I get to be the BD...
An interesting point you raise. I work in a big corporation and have served on volunteer groups/school committees and the politics are MUCH worse in the volunteer sector. Henry Kissinger said that where there's less money involved, there are more politics. In big corporations, there's big money on the line so people have to get stuff agreed and out the door, but in volunteer groups, no one is paid to do well so you can be as contentious as you like.
"sclerotic processes of big companies" -- since my mother just died of Multiple Sclerosis, I would assume 'sclerotic processes' mean diseased processes?
Elizabeth, that is ABSOLUTELY the gospel truth. Several factors at play:
1) In a volunteer situation, one is free to stomp off at any point, in a huff, when things don't go to suit one. You cannot, after all, be fired from the Junior League or a church women's group!
2) One is generally in a volunteer situation because one wants to be there---for altruistic purposes (I guess these things are social boons, an important aspect for some climbers and herd-animals:) Money is not an object, as belonging to these things generally COST bigtime!
But I disagree that there's no money in play, in a volunteer committee...my daughter's school had several very rich families, and trust me, if some Money Mama was on the committee, it was Her Way or the Highway, so to speak. I also served on the board of the MHJA (Mississippi Hunter-Jumper Association) that ran the horse shows, etc., and WHOOOOA---you have never seen so much venom and bile. There were two women in particular, whose daughters had 5/6-figure Thoroughbreds, who ran the whole thing like Caligulas. I soon opted out of that honored board!
Bowing out of office politics is probably not an option, if one wants that next paycheck.
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