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The Wisdom of Crowds – Make Better Decisions

In his book, “The Wisdom of Crowds“, James Surowiecki outlines the factors that enable crowds to make more accurate decisions than the smartest person in that crowd.

In 1906, scientist and statistician Francis Galton (a cousin of Charles Darwin’s) discovered something remarkable in a remarkably nonscientific setting: a British Fat Stock and Poultry Exhibition.

Ox Tale

Galton came across a weight-judging competition. A crowd was lining up to place wagers on the weight of the ox. Eight hundred people tried their luck. They were a diverse lot. Many of them were butchers and farmers, but there were also quite a few who had no insider knowledge of cattle…

Galton was interested in figuring out what the ‘average voter’ was capable of because he wanted to prove that the average voter was capable of very little. So he turned the competition into an impromptu experiment. When the contest was over and the prizes had been awarded, Galton borrowed the tickets from the organizers and ran a series of statistical tests on them, including the mean of the group’s guesses.

Galton thought that the average guess of the group would be way off the mark. After all, mix a few very smart people with some mediocre people and a lot of dumb people, and it seems like you’d end up with a dumb answer. But Galton was wrong. The crowd guessed 1,197 pounds; the ox weighed 1,198 pounds. The crowd’s judgment was essentially perfect.

Galton was the first to exhibit that crowds can have tremendous collective intelligence that vastly supersedes the brain power of individuals. Since then, further research has both confirmed the wisdom of crowds as well as elucidated which environments are most conducive to collective ideation and problem-solving. Under the right conditions, groups of non-experts – from racetrack bettors to the staff of large multinational corporations – “are remarkably intelligent, and are often smarter than the smartest people in them.”

Three Key Factors

Specifically, there are three main environmental factors that help to make groups more “wise,” the absence or imbalance of which is to the detriment the group’s efficacy. Namely:

  1. Diversity: A group needs a range of opinions to arrive at a sound overall consensus.
  2. Independence: group members must be empowered to add their voices individually; collective wisdom arises from members thinking, evaluating, and contributing independently.
  3. Decentralization: this is a means to the former two factors, for central direction hinders them both, and ultimately lessens the wisdom of the crowd.

Finding A Balance

For crowd wisdom to flourish members need the right balance. They need rules, but not too many. They need the ability to communicate amongst themselves, but not to the point that it impedes their independence of thought and leads to imitation and a herd mentality. Finally, depending on the nature of the ideas and problems being addressed, groups must be the right size. Engage too few and you won’t be able to reach the critical mass necessary for the collective to become wise. Engage too many and the crowd can become too big for all of the relevant information to reach everyone involved.

When the conditions are just right, crowds can demonstrate tremendous insight and problem-solving capabilities unmatched by any individual expert.

Tapping Into the Wisdom of Crowds at Your Organization

Wisdom of Crowds Lewis PlattLewis Platt, who was the CEO of HP from 1992 to 1999 said, “If only HP knew what HP knows, we would be three times more productive.”  What Lewis was getting at was the wisdom of crowds.

The first critical step in tapping into that wisdom is to take steps to give employees a voice. Leadership is often very isolated from the knowledge of front line employees. Sidney Yoshida termed this isolation as the iceberg of ignorance. He completed an analysis that demonstrated upper management knew of just 4% of the problems known to front line employees. We wrote two different posts that explore why this is a critical new capability for organizations:

Of course, this isn’t easy to do with a larger organization. You need the right tools and processes need to exist to facilitate this. It’s also important to do this right. Poorly implemented tools and processes aren’t just ineffective, they can do more damage than good.  We turned to the world of academics to dig into the research on how you can gather the wisdom of the crowd. The two areas that have the most research are in the areas of suggestion systems, brainstorming, and innovation management systems. To learn more about best practices in each of these respective areas, have a look at the following resources.

About SoapBox

SoapBox Innovations creates software that helps organizations give employees a voice. Whether your focus is on collecting feedback or soliciting ideas, we make it easier to act on employee input that drives real business value.

Harness the power of employee ideas.