Wisdom of Crowds-B





Here are the links to the articles that we used in our research paper.

Below is the research paper:

James Surowiecki explores a deceptively simple idea in the book The Wisdom of Crowds: large groups of people are smarter than a few on their own. First published in 2004, The Wisdom of Crowdsis written about the collection of information in groups, resulting in decisions that Surowiecki argues, are often better than could have been made by any single member of the group. The book relates to diverse collections of independently-deciding individuals, rather than crowd psychology as traditionally understood. Throughout the book, numerous case studies are presented as well as actual accounts to illustrate its arguments. The result is a highly original set of conclusions about how our world works.
The opening event relates British scientist, Francis Galton's, surprise that the crowd at a county fair accurately guessed the weight of an ox when their individual guesses were averaged. After tallying the wagers, the average was closer to the ox's true butchered weight than the estimates of most crowd members. The crowd’s estimates were even closer than any of the separate estimates made by cattle experts.
Chapter 7
As the book is based around people in large groups working together, there is no surprise when the topic of traffic arose. Traffic has been a problem since the vehicle was invented, which has forced people to constantly create ideas to resolve this ongoing problem.
One area of particular interest is downtown London, where a quarter of a million vehicles drive into a eight square mile radius everyday, battling the millions who use public transportation. The traffic has gotten so bad that it seems faster to walk than drive. London’s government tested an idea of congestion charging. In 2003, London started charging people who drove into the downtown area, “a daily fee of 8 British pounds” (Rosenthal, 2007). This resolution was suppose to raise 180 million pounds to invest in public transportation and cut the traffic down by twenty percent (Surowiecki, 2004). According to Libby Rosenthal, reporter for the New York Times,”Everyone in London is affected and has had to adjust to the regulations, though some who are “too cheap” choose to take public transportation” (Rosenthal, 2007). Surprisingly, the “congestion pricing” has worked and has been far more successful than most thought it would be.
As stated in the book, “most people feel as though they have no choice about when or how they commute and the thought of the wealthy paying to zip along empty roads, while everyone else takes the long way around seems unfair” (Surowiecki, 2004). This may seem true, but as William Vickney explained, “If the main road were free everyone would use it, causing bad traffic, but if it had a price, than people would be forced to consider alternatives. Also, traffic is not the only part of our lives that we pay for” (Surowiecki, 2004). For example, long distance calls are more expensive during the day, it cost more to go to Las Vegas on the weekend than during the week, and drinks are cheaper during happy hour. This shows that in many other parts of our daily lives, we pay more/less depending on the time,which helps to help cut down congestion in various ways.
Many other cities, from Milan to New York, are contemplating taking London’s lead with the introductionof an electronic smart card. These devices are installed into each vehicle so when they pass an area where the toll is located, money will automatically be taken from their card. This prevents people from cheating along with making the drivers decisions more obvious. Having this modern day technology saves commuters time and money.
While trying to create the best solutions to cut traffic, many have suggested to vary the price depending on traffic flow, weather, and type of vehicle. A great example of this is, “If I-5 between Sacramento and San Francisco suddenly became clogged with traffic because of a broken down trailer, than it would cost you more to use that road” (Surowiecki, 2004).This is a great idea to ensure that the traffic will not get worse and actually help the drivers avoid congested areas.
Chapter 8
Surowiecki goes on to inform the readerabout the collaboration between others within the world of science. When picturing a scientist, many would imagine a man in a white lab coat working alone in his lab with books piled high to the ceiling and test tubes all around, but in reality, this is not the case. In a well known case of the outbreak of SARS, the World Health Organization (WHO) contacted eleven research labs and asked them to take part in a “collaborative multicenter research project” (Surowiecki, 2004). As demonstrated in the SARS case, “Within less than a month, the labs were able to find the cause of the disease so that a vaccine could quickly be found, to save the infected people” (Surowiecki, 2004). The WHO did not give the labs any orders, the scientists themselves, without the top-down direction, were able to put in place a system to share their research. Through the use of daily teleconferences, posted electronic-microscope photographs, and tested hypothesis, the scientists were able to work at the same time on the same samples, to multiply their speed and effectiveness.
Even before World War I, collaboration on scientific experiments had been taking place. Scientist had collaborated to incorporate many kinds of knowledge faster, thus making each other more productive. Times have changed, and the fieldof science has “become more specialized, with the number of subfields within each discipline becoming more proliferated. It’s become difficult for one single person to know everything there is to know” (Surowiecki, 2004). A scientist now makes a discovery and publishes it so it can be used by other scientist in their field. This, Surowiecki feels, makes society as a whole end up knowing more information when it is diffused as widely as possible (Surowiecki, 2004).
Unfortunately, there is a flaw in the way the scientific community discovers truth. The major flaw is that most scientific research rarely gets noticed. Research paper after research paper goes unread, while a small number are read by many people. The difference comes down to notoriety. The power of name recognition in the field of science is startling. Throughout the industry, this reputation status has been labeled “the Matthew Effect” (Surowiecki, 2004). The Matthew Effect can be seen as a way for scientists to filter daily information. The redundancy of scientific information is immense; the same experiments are performed with the same outcome. The downfall to the Matthew Effect is that potentially great work could go ignored simply because the person did not have the right brand name. Credibility should go a long way, but “reputation should not become the basis of a scientific hierarchy” (Surowiecki, 2004).
Chapter 9
Under the right circumstances, groups can be remarkably intelligent. However, groups can be ineffective and make tragic mistakes by coming together. This is especially exemplified in the case of the 2003 NASA mission of the shuttle Columbia. While the shuttle was ascending into the atmosphere, a large piece of foam hit a part of the left wing, causing the shuttle to suddenly explode. According to the NASA website, “Columbia and crew were lost during reentry over East Texas at about 9:00 a.m., 16 minutes prior to the scheduled touchdown” (NASA, 2003).
Later that week, the mission management team (MMT) for NASA held a teleconference with Don McCormack. The meeting was the second since the shuttle’s launch, five days prior. Preceding the meeting, McCormack had been briefed by several organizations, including Boeing, Lockheed Martin, and the Debris Assessment Team (DAT) concerning the consequences of the piece of foam. The DAT reached no formal conclusions before the teleconference, but stressed to McCormack there was a need to be alarmed. During the teleconference, McCormack failed to mention the piece of foam, till the end of the conference. After discussing this issue, Linda Ham the MMT leader, responded to the group by implying that there was nothing they could do about it, and went on to decide for the attendees that it was inconsequential (Surowiecki, 2004). The meeting then moved on to another topic. As latered discovered, “A piece of foam fell off the tank during launch on January 16, striking heat resistant tiles on the shuttles left wing, causing the shuttle to explode” (Stenger, 2003).
Unfortunately, the Columbia explosion was a powerful testament of the way groups could actually fail to make people more intelligent and productive. Small groups are widely used throughout American culture. The effects of bad group decision-making could potentially affect thousands of American lives, especially within the justice system. When working in a group, it is important to know and understand how to collaborate, so that each group member’s greatest assets are utilized. “A successful face-to-face group is more than just collectively intelligent. It makes everyone work harder, think smarter, and reach better conclusions than they would have on their own” (Surowiecki, 2004). Though this is true, some elements must not occur in order for this to happen. Surowiecki argues that three main elements, polarization, member status, and talkativeness need to be present in order for a group to potentially fail. For a group to be truly effective and efficient they need to have an even playing field, which can be achieved by avoiding the three elements previously mentioned.
Chapter 10
The lag time between sketch and floor poses a problem for the fashion industry. The lapse of time prevents the customer from quickly getting what she wants and needs. The company Zara has overcome the inefficiencies of the business by using fast and flexible distribution to retailers. The flexibility of being able to quickly adjust to ever changing wants and demands has led to the success of Zara. Zara believes that it’s adaptability is it’s core competency. The company does not outsource because this would cause them to lose their ability to respond quickly and precisely to consumer demands. The advantage of not outsourcing may not always be cheaper, but the cost savings is offset by the loss of ability to control and coordinate its own resources.
Hollywood gangster films, The Godfather, Reservoir Dogs, and Heat, represent three different styles of company management. All three movies have the same plot, to make money, which also describes the goal of the average business (Surowiecki, 2004). These movies represent “the challenges that are created anytime you try to get a group of self-interested people to work together to achieve a common goal” (Surowiecki, 2004). The Corleone family, from The Godfather, retains the structure and coherence of a traditional corporation. The tight knit group from the movie Heat is like a successful small business with high levels of trust and specialization between members and the Reservoir Dogs model allows for a handpicked group with diverse abilities specifically needed for the job, which is very similar to outsourcing. These movies demonstrate that there is no ideal solution for running a business. Zara seeks to blend the advantages of all three models into one to maximize profit and efficiency.
It was assumed that 20th century corporations all had to work the same way (Surowiecki, 2004). Hierarchical organizations desired full control over the supply chain. It was this assumption that led to the economic decline of the American corporation. The new idea of employee empowerment during the 1990’s led to happier employees, but it did not lead to higher productivity. Collective decision making was confusing for groups. This “can’t we all get along” approach, gave way to seemingly endless layers of management, which was contradictory to the phenomenon of the wisdom of a crowd (Surowiecki, 2004). On the other hand, attempting to run a company from the top-down is a futile task. The rigid structure discourages free flow of information among levels of the bureaucracy. Additionally, the lack of diversity among top management led to a decline in innovations among American companies in the 1970’s and 1980’s. It was these problems that eventually led to the downfall of many American car companies.
The success of Silicon Valley companies began an emphasis on a more decentralized management structure. However, the problem of “inauthentic behavior” still permeated most organizations (Surowiecki, 2004). One problem was the hostility of superiors towards opposition from subordinates. The incentive systems encouraged people to be deceptive because pay was based upon performance relative to expectations. Managers started setting targets that were easily reachable by low-balling estimates than engaging in accounting gimmickry to meet goals. During the 1990’s, firms found a way to instill a sense of ownership among employees. Stock options aligned the individuals interests with the corporations because in the stock market people get paid based on what they do, not whether they do what they are expected.
Ideally, decisions about local problems should be made by people close to the problems. Decentralization makes people more engaged by handing them more responsibility for their own environments and actions. It also makes easier coordination because companies rely on workers to find new more efficient ways of getting things done. Paradoxically during the 1990’s, companies paid attention to the virtues of decentralization, but also treated CEOs like superheroes (Surowiecki, 2004). However, there is little evidence to suggest that a single individual can consistently make superior decisions when faced with uncertainty.
The idea that the more important the decision, the better off it is in the hands of a group, rather than the hands of an individual person, is a theory that many corporations utilize. Big decisions should be made by the board of directors, not the CEO. It is hard to overcome the theory that authority needs to rest in the hands of the individual. However, some of the best CEOs realize that they are limited in their own decision-making skills and make important decisions using “group management” (Surowiecki, 2004). The collective judgment of a group will usually always trump the individual wisdom of one person.
Chapter 11
The wisdom of crowds seems to prevail in nearly all situations in which the group is a random spread of people. From the stock market, where even the professional opinion is affected by personal flaws, to the bowling craze of the 50’s that created a bubble of excitement that inevitably burst, and finally to beauty contests where the opinion of who is beautiful is based off what one thinks the other might be thinking. The opinions of people as a whole cause masses to second guess, rethink, and actually come up with worse answers than if they were not given extra information at all.
“The idea of the wisdom of crowds is not that a group will always give you the right answer but that on average it will consistently come up with a better answer than any individual could provide”(Surowiecki, 2005). This is especially true with the stock market investors. Growth in the market is based off accuracy and not feelings, making it a problem when individuals allow a bias to sway their decisions. Again, investors are more accurate when they are diverse, as we have seen true thus far in the issues covered. Many begin to go wrong with decisions when paying too much attention to trends. CNBC began airing the results of the stock market and adding in advice and opinions on the topic. Investors were reacting to the information abruptly. The information being widely available, so fast, created a race for who could act fastest, which affected the performance of investors. The opinions presented on CNBC disturbed their decision-making skills and investors began acting the same, and the wisdom of the crowd began to fail.
Another mistake investors make is holding onto declining stock in hopes of it returning back to the original price eventually. Most of the time, people will be convinced that something in the future will help make holding on worth it. In the case of LTCM, they were not so lucky, having the opposite effect and having similar results of failure overall. Having found success in their business that catered to a small, specific market, they were missing a key component to all deals. When stock began to plummet, they couldn’t hide this from the small market because everyone knew better and was aware of the decline. With the lack of diversity, and one side to pull when they were pushing, led to their failure. They created a market that was too much alike to be smart enough to know that if someone had bought stock, it would eventually bring the company out of recession.
One of the last fatal flaws in investing is overconfidence. Wreck less behaviors of trading is damaging and avoidable if investors would wait out the stock flow and make educated and rational decisions. “If investors, as individuals, are irrational, it’s still possible that when you aggregate all their choices, the collective outcome will be rational and smart…what’s true of the individual is not necessarily true of the group” (Surowiecki, 2004). Even if several investors make bad choices, it does not mean the complete failure of the crowd’s opinion.
The bowling bubble of the 1950’s was first inflated with the introduction of the automatic pinsetter, making bowling faster and more enjoyable to the masses. This trend was blown up with the investment interests in the new favorite pass time. Americans were estimated to be spending at least an hour a week bowling (Surowiecki, 2004). Stocks immediately reflected the interest of Americans love for bowling. Like all good things, however, it eventually came to an end. The lasting effects of the bowling trend were minimal. “Prices rise because people expect them to keep rising. At least they do until the moment they don’t. Then comes the stampede for the exit” (Surowiecki, 2004). The bubble burst by being over inflated and overdone. People began to lose interest and stocks and investments in the bowling industry greatly suffered.
Collective decision-making can go wrong and the bowling bubble is a great example. The conditions of such a huge fad meeting its peak, forced out all intelligent, diverse, and private judgment. More problems began to arise when concerns are “not just what the average investor thinks but what the average investor thinks the average investor thinks” (Surowiecki, 2004). This is applied to the beauty contest theory. The idea that if given a choice among the most beautiful women, one would choose beauty based off what they think the other person’s perception of beauty is, as opposed to just using their own judgment. “The more investors who refuse to buy stocks just because other people are buying them, the less likely it will be that a bubble will become inflated” (Surowiecki, 2004). As well as the truth that by abstaining from dependency on what the other man may be thinking, like in the beauty contest theory, intelligent group decisions can be met.
Chapter 12
In January, 2003 a National Issues Convention Deliberative Poll was held in order to judge the ordinary American citizen’s knowledge of political issues facing the nation. 343 people were carefully chosen and were represented as a cross-section of the American population. They joined together for a political debate in which they were able to ask experts and politicians questions. Before the debate, they were polled to get a sense of their positions on issues. After the debate, they were polled again to see what difference the deliberations made in their positions. The idea behind the poll was to prove that ordinary people are capable of making voting choices when they are educated on the issues that the candidates in question are backing or opposing. These polls were considered a success and are now delivered in hundreds of cities across the world (Surowiecki, 2004).
The idea for this poll came from a political scientist, at the University of Texas, named James Fishkin. Fishkin was frustrated with the limitations of traditional polling data. He thought Americans were not given enough information or the opportunity to make intelligent political choices. Fishkin thought with the right information, American’s were very capable of making intelligent political decisions. The concept behind these polls was that experts and policy elites should not be the only ones who can participate in political debates. “Ordinary people are more than capable of understanding complex issues and making meaningful choices about them when they are given enough information and a chance to talk things over with peers” (Surowiecki, 2004). Fishkin went on to propose that the U.S. adopt Deliberation Day. This is a proposed national holiday in which two weeks before major elections, registered voters would gather in their neighborhoods in small groups of 15 or more to discuss major issues at stake in the campaign. Those who participated and then went on to vote would receive $150(Surowiecki, 2004).
This idea of Deliberative Democracy has critics who say it rests on an unrealistic idea of peoples “civic-mindedness” (Surowiecki, 2004). Although people may be able to follow and understand complex political arguments, many do not have the patience or the energy to do so. Futhermore, they may not want to take a holiday to talk politics (Surowiecki, 2004).
Some say voting and democracy in general is a vehicle for the pursuit of self-interest. Deliberative Democracy may not work because people are more concerned with their own immediate needs than the long-term needs of others. Voters elect candidates who look after their particular interests, not those who are concerned with the well-being of the country. Politicians want to be elected or re-elected, therefore they do things that they feel has the best chance of winning over voters, not what is necessarily best for the country. This leads to economic policy being run in the interests of powerful groups and not in the interests of the good of the people. (Surowiecki)
On the other side of the voting spectrum lies the “public choice theory” which attempts to answer the question “why do people bother to vote?” Their one vote will not impact who the elected candidate will be; it has zero chance of changing the outcome of an election. Even after the elected politician, or even the president, is in office his/her impact on one voter’s life is relatively small. So why do people continue to vote? “If your vote doesn’t matter and the choice of the winner doesn’t make much of a difference either, then why vote?”(Surowiecki, 2004). People vote because they think they should. People have a “sense of duty” that causes them to vote and because they want to have a voice (no matter how small) in how their government is ran, they do it anyway (Surowiecki, 2004).
Furthermore, in contradiction to the previous claim that people only vote depending on their self interest, people said that their personal financial predicament did not change the way they voted, but that the national economic conditions could change their vote one way or another. People pick the best person for the job, not just the best person for themselves. This is contradictory to the self-interest theory. Although many surveys and polls have proven that many Americans are not well informed in the political arena, it is thought that most Americans are still capable of electing the person who will make the best decision on political issues, no matter their personal social or financial status. This means that American’s might not be well informed, but democracy still proves effective in putting the best people for certain jobs in those particular offices.

In the fashion industry, collaboration between others is essential. Ideas, cultures, and influences are constantly being transferred between others to formulate and implement new ideas. A diverse group needs to be established in order to create the most innovative, fashion forward ideas. Although, in fashion, it is often times one person’s designs that are implemented, it still requires a whole team to get them ordered, shipped, and delivered. It takes a team working together to come up with a way to market and advertise the product to the public. A great deal of a company’s reputation relies on their brand image and how the public perceives the company. If group work is not utilized, then the most effective plans and ideas can not be reached. Group work is frequently used in the industry, and for it to be most effective, managers need to ensure that they are not using any negative elements in group discussions. Having the key elements in place, the group work can be less effective than individual work, depending on how many negative factors are occurring and how often. Overall, group work can be very beneficial, especially in a creative and diverse industry like fashion.

Kayla Greentree

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