Crowd Wisdom

Over the past few years, I have taken many trains from New York’s Penn Station to Boston. Over those trips, I’ve noticed a pattern: about 5-10 minutes before the arrival track of a train is announced, people start to congregate around a specific track where they believe the train will be.

While you’d expect the results to be no better than blind guesses, the crowd seems to be right a vast majority of the time. This happens even though, as best as I can tell, the train’s arrival track follows no discernable pattern.

Following the crowd is often viewed as undesirable. In particular, it can be a bad thing in situations where people follow one another blindly, creating a herd mentality which is based on FOMO and the suspension of disbelief. And yet, there is a reason why we feel the urge to follow the crowd. A large group of people, especially a diverse group with varied perspectives, can often serve as a proxy for collective intelligence in solving a wide range of problems.

The wisdom of crowds is often associated with a story about a 19th-century mathematician named Francis Galton. At a state fair, Galton encountered a contest in which people were asked to guess the number of jellybeans in a jar. Galton wondered how accurate the crowd’s guesses would be, so he tabulated the estimates of 787 people at the fair.

Galton found that the average of nearly 800 guesses was 1,197 jellybeans. Incredibly, there were actually 1,180 jellybeans in the jar. The seemingly miraculous closeness of the crowd’s guesses led Galton to propose that the collective intelligence of a group of people can be superior to that of any individual.

While we are naturally inclined to trust an expert’s opinion over a novice’s, the wisdom of crowds concept suggests a diverse group of people’s collective opinion may be more accurate in many cases. This is likely because the group’s collective knowledge and experience help cancel out individual biases and errors.

This idea has been applied to various fields—including finance, politics, and technology—and it has influenced decision-making processes in many organizations.

For leaders who must regularly make complex decisions or projections with limited information, understanding the wisdom of crowds can be quite valuable. However, it’s important to keep the following in mind.

• Seek out input: Leaders often feel the inclination to keep decision-making groups small in order to ensure a more orderly discussion and control the flow of information in an organization. However, it’s often worth sourcing different opinions and perspectives before deliberating or selecting a course of action. Getting a larger group’s input may uncover insights or considerations that wouldn’t occur to one person or even a small team.
• Value diversity: Diversity is crucial in decision-making processes, including in large groups. If a group is too homogeneous, containing a collection of people with the same backgrounds or expertise, the group’s members may be prone to the same biases and errors. When a group of people with different backgrounds, experiences, and perspectives come together to make a decision or solve a problem, a wider range of ideas and solutions is raised. This helps to avoid groupthink, a trap where a group of people conform to a dominant opinion and ignore dissenting views. Subsequent studies to Galton have proved repeatedly that homogenous “experts” often get it wrong.
• Look for dissent: To be clear, the wisdom of crowds does not occur because everyone in a group believes the exact same thing. Rather the group is a proxy for an aggregate conclusion. In fact, conflicting opinions within a group is often a sign that the group’s output is accurate. Because the members of the group have challenged each other’s opinions and assumptions, it is more likely that they have polished their collective opinion better than a group where everyone immediately agrees. This is why the wisdom of the crowds doesn’t apply in emotional manias, fads, or speculative bubbles, where people tend to base their own beliefs on the opinions of others, without questioning. It’s not a compilation, it’s a bandwagon

While many successful people aren’t conformists—especially entrepreneurs and visionaries—Galton’s experiment reminds us that sometimes trusting the wisdom of the crowd may often be the right move. A great leader needs to learn to discern what the crowd may know best and when to recognize that the blind might be leading the blind.

Quote of The Week:  “The many are smarter than the few.” – James Surowiecki

Have a great weekend!
Bob

If you found this note helpful, I would love it if you could share it with someone who would benefit from the message.