the wisdom of crowds
DESCRIPTION
The Wisdom of Crowds. A warm-up exercise. Everyone write down what they think my age is individually. Now get the average of the answers. How close are you to correct?. Francis Galton. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/1.jpg)
The Wisdom of Crowds
![Page 2: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/2.jpg)
A warm-up exercise
Everyone write down what they think my age is individually.
Now get the average of the answers.
How close are you to correct?
![Page 3: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/3.jpg)
Francis Galton
Francis Galton (16 February 1822 – 17 January 1911), cousin of Charles Darwin, was an English Victorian polymath, anthropologist, eugenicist, tropical explorer, geographer, inventor, meteorologist, proto-geneticist, psychometrician, and statistician.
![Page 4: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/4.jpg)
Francis Galton
In 1906 Galton visited a livestock fair and stumbled upon an contest.
An ox was on display, and the villagers were invited to guess the animal's weight after it was slaughtered and dressed.
![Page 5: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/5.jpg)
Francis Galton
Galton disliked the idea of democracy and wanted to use the competition to show the problems of allowing large groups of people to vote on a topic.
![Page 6: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/6.jpg)
Francis Galton
787 people guessed the weight of the ox, some were experts, farmers and butchers, others knew little about livestock. Some guessed very high, others very low, many guessed fairly sensibly.
Galton collected the guesses after the competition was over
![Page 7: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/7.jpg)
Francis Galton
The average guess was 1,197 pounds
![Page 8: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/8.jpg)
Francis Galton
The average guess was 1,197 pounds
The correct weight was 1,198 pounds
![Page 9: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/9.jpg)
Francis Galton
The average guess was 1,197 pounds
The correct weight was 1,198 pounds
AMAZING
![Page 10: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/10.jpg)
Wisdom of Crowds
What Dalton discovered was that in actuality crowds of people can make surprisingly good decisions IN THE AGGREATE, even if they have imperfect information.
![Page 11: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/11.jpg)
Other examples
![Page 12: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/12.jpg)
Who wants to be a millionaire?
![Page 13: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/13.jpg)
Who wants to be a millionaire?
Compare the lifelines;
– Phone a friend
– Ask the Audience
![Page 14: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/14.jpg)
Who wants to be a millionaire?
The correct answer is given;
– Phone a friend
– Ask the Audience
![Page 15: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/15.jpg)
Who wants to be a millionaire?
The correct answer is given;
– Phone a friend
– Ask the Audience
![Page 16: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/16.jpg)
Who wants to be a millionaire?
The correct answer is given;
– Phone a friend
– Ask the Audience
![Page 17: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/17.jpg)
Other examples
![Page 18: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/18.jpg)
The Spaceshuttle Challenger
On January 28, 1986, when the Space Shuttle Challenger broke apart 73 seconds into its flight, leading to the deaths of its seven crew members. The spacecraft disintegrated over the Atlantic Ocean, off the coast of central Florida
![Page 19: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/19.jpg)
The Spaceshuttle Challenger
The stock market did not pause to mourn. Within minutes, investors started dumping the stocks of the four major contractors who had participated in the Challenger launch:
– Rockwell International, which built the shuttle and its main engines;
– Lockheed, which managed ground support; – Martin Marietta, which manufactured the ship's external fuel
tank; and – Morton Thiokol, which built the solid-fuel booster rocket.
![Page 20: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/20.jpg)
The Spaceshuttle Challenger
Twenty-one minutes after the explosion, Lockheed's stock was down 5 percent, Martin Marietta's was down 3 percent, and Rockwell was down 6 percent.
![Page 21: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/21.jpg)
The Spaceshuttle Challenger
Morton Thiokol's stock was hit hardest of all. As the finance professors Michael T. Maloney and J. Harold Mulherin report in their fascinating study of the market's reaction to the Challenger disaster, so many investors were trying to sell Thiokol stock and so few people were interested in buying it that a trading halt was called almost immediately. When the stock started trading again, almost an hour after the explosion, it was down 6 percent.
![Page 22: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/22.jpg)
The Spaceshuttle Challenger
By the end of the day, its decline had almost doubled, so that at market close, Thiokol's stock was down nearly 12 percent. By contrast, the stocks of the three other firms started to creep back up, and by the end of the day their value had fallen only around 3 percent.
![Page 23: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/23.jpg)
The Spaceshuttle Challenger
What this means is that the stock market had, almost immediately, labelled Morton Thiokol as the company that was responsible for the Challenger disaster.
Months later it was discovered that it was in fact Morton Thiokol who caused the problem with the production of faulty O-rings.
![Page 24: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/24.jpg)
The Spaceshuttle Challenger
How did the stock investors know ?
![Page 25: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/25.jpg)
The Spaceshuttle Challenger
How did the stock investors know ?
There is no satisfactory explanation, other than the wisdom of crowds.
![Page 26: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/26.jpg)
Other examples
![Page 27: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/27.jpg)
Google PageRank Algorithm
How does Google work ?
How does it classify pages so that typically the page you are looking for is the in first ten links it returns?
![Page 28: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/28.jpg)
Google PageRank Algorithm
It uses the PageRank algorithm, the specifics of which are a closely guarded secret, but the main idea is easy to grasp: – the more sites that link to a certain URL with a
certain phrase, the higher the rating. – This works because each link is vote for the
connection between the phrase and the site.
![Page 29: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/29.jpg)
Google PageRank Algorithm
It uses the PageRank algorithm, the specifics of which are a closely guarded secret, but the main idea is easy to grasp: – the more sites that link to a certain URL with a
certain phrase, the higher the rating. – This works because each link is vote for the
connection between the phrase and the site.
![Page 30: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/30.jpg)
Exercise
A friend of yours said they will be in Dublin on Saturday and want to meet you, but you didn’t hear where they said, if you had you guess where would you go ?
![Page 31: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/31.jpg)
Exercise
A friend of yours said they will be in Dublin on Saturday and want to meet you, but you didn’t hear where they said, if you had you guess where would you go ?
Most people would tend to say the Spire or Cleary’s clock.
![Page 32: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/32.jpg)
Exercise
You also missed the time at which you are supposed to meet them at, if the meeting is for a Saturday, what time will you head into town for?
![Page 33: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/33.jpg)
Exercise
You also missed the time at which you are supposed to meet them at, if the meeting is for a Saturday, what time will you head into town for?
Most people say Noon or 1 o’clock.
![Page 34: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/34.jpg)
Exercise
Thus in general the majority of pairs of two people who don’t know when are meeting or where they are meeting could hook up without prearrangement.
![Page 35: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/35.jpg)
So what does this tell us?
![Page 36: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/36.jpg)
Wisdom of Crowds
It shows us that groups of people make excellent decisions and can select the correct alternative out of a number of options without any specific expertise.
How could this be?
![Page 37: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/37.jpg)
It is important to remember…
![Page 38: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/38.jpg)
Experts are not know-it-alls
Individual experts really aren’t as smart as we think.
Herbert Simon and W.G. Chase (1973) explored the nature of expertise in the domain of chess.
![Page 39: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/39.jpg)
Experts are not know-it-alls
They showed a chess-board in the middle of a game to an expert chess player and an amateur.
They asked both to recreate the locations of all of the pieces on another boards, consistency the experts were easily able to reproduce the boards, whereas the amateur rarely could.
![Page 40: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/40.jpg)
Experts are not know-it-alls
So does this mean experts are smarter ???
![Page 41: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/41.jpg)
Experts are not know-it-alls
No, because when they put the pieces on the board randomly, the expert and amateur both did equally as well.
This shows the very, very limited scope of expertise.
![Page 42: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/42.jpg)
Experts are not know-it-alls
We normally assume people who are intelligent at one pursuit are good at all, but in actuality this is not at all the case.
Chase said the intelligence and expertise is, in fact, “spectacularly narrow”
![Page 43: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/43.jpg)
A key point is…
![Page 44: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/44.jpg)
Diversity
Scott Page has shown that groups who display a range of perspectives outperform groups of like-minded experts.
![Page 45: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/45.jpg)
Diversity
Diversity yields superior outcomes, and Page demonstrates this in a range of ways.
Page suggests that difference beats out homogeneity, whether you're talking about citizens in a democracy or scientists in the laboratory.
Diversity gives you a larger range of opinions to select from.
![Page 46: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/46.jpg)
Diversity
If we don’t have diversity in our groups we end up with GROUPTHINK.
![Page 47: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/47.jpg)
GroupThink
Groupthink occurs when a group makes faulty decisions because group pressures lead to a deterioration of “mental efficiency, reality testing, and moral judgment” (Irving Janis, 1972, p. 9).
![Page 48: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/48.jpg)
GroupThink
The key factor that causes Groupthink is when the crowd is homogeneous.
If all members think and act the same this can lead to groupthink, as can be seen in highly regulated organisations like the army.
To harness the power of the wisdom of crowds you really need diversity, the nay-sayers, the moaners and complainers, and the crazy optimists, the fools, the happy-go-luckies – you need the whole mix.
![Page 49: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/49.jpg)
Consequences of GroupThink
Pearl Harbour The Bay of Pigs Failed Rescue Attempt of Hostages at US
Embassy in Iran US Invasion of Iraq
![Page 50: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/50.jpg)
Symptoms of GroupThink
Illusion of invulnerability Collective rationalization Belief in inherent morality Stereotyped views of out-groups Direct pressure on dissenters Self-censorship Illusion of unanimity Self-appointed ‘mindguards’
![Page 51: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/51.jpg)
Illusion of Invulnerability
Creates excessive optimism that encourages taking extreme risks.
![Page 52: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/52.jpg)
Collective Rationalization
Members discount warnings and do not reconsider their assumptions.
![Page 53: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/53.jpg)
Belief in Inherent Morality
Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions.
![Page 54: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/54.jpg)
Stereotyped Views of Out-groups
Negative views of “enemy” make effective responses to conflict seem unnecessary
![Page 55: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/55.jpg)
Direct Pressure on Dissenters
Members are under pressure not to express arguments against any of the group’s views.
![Page 56: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/56.jpg)
Self-censorship
Doubts and deviations from the perceived group consensus are not expressed
![Page 57: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/57.jpg)
Illusion of Unanimity
The majority view and judgments are assumed to be unanimous.
![Page 58: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/58.jpg)
Self-appointed ‘mindguards’
Members protect the group and the leader from information that is problematic or contradictory to the group’s cohesiveness, view, and/or decisions
![Page 59: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/59.jpg)
Signs of GroupThink
Incomplete survey of alternatives Failure to examine risks of preferred choices. Poor information search. Selective bias in processing information at
hand. Failure to work out contingency plans.
![Page 60: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/60.jpg)
What can we do ?
![Page 61: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/61.jpg)
What can we do ?
The manager/leader should assign the role of critical evaluator to each member of the crowd
![Page 62: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/62.jpg)
What can we do ?
The manager/leader should avoid stating preferences and expectations at the outset
![Page 63: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/63.jpg)
What can we do ?
Each member of the group should routinely discuss the groups' deliberations with a trusted associate and report back to the group on the associate's reactions
![Page 64: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/64.jpg)
What can we do ?
One or more experts should be invited to each meeting on a staggered basis and encouraged to challenge views of the members
![Page 65: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/65.jpg)
What can we do ?
At least one member should be given the role of devil's advocate (to question assumptions and plans)
![Page 66: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/66.jpg)
What can we do ?
The manager/leader should make sure that a sizeable block of time is set aside to survey warning signals.
![Page 67: The Wisdom of Crowds](https://reader036.vdocument.in/reader036/viewer/2022062308/56812c68550346895d91000f/html5/thumbnails/67.jpg)
Diversity (recap)
It not only contributes by adding different perspectives to the group but also by making it easier for individuals to say what they really think.