More insights from the European Market Research Event. Today, James Surowiecki on The Wisdom of Crowds....
James Surowiecki is an extremely well-skilled public speaker. He managed to give a detailed and well-structured 45-minute presentation on his book The Wisdom of Crowds with many examples, without notes and without slides.
His argument is that crowds are often smarter collectively than even the smartest individuals it contains. He claims that "if you can figure out ways to tap into the collective intelligence of your organization and the collective intelligence of your consumers, you can radically change your capability to resolve problems and to forecast the future."
Surowiecki gave many examples of how that is being done:
Other examples include HP, where employees could buy or sell shares in how well printer sales were going to do, and their predictions outperformed internal forecasts. Siemens also used this technique to predict how long a particular software product development is going to take. Microsoft has also done something similar, and Google has launched PROPHET, which predicts 200 events of all kinds -- and they have been almost perfectly correct.
But crowds only act intelligent under three conditions:
1. Aggregation. It is about the aggregate judgment of lots of individuals, not about consensus.
2. Diversity. The crowd is cognitively diverse with differences of perspective and differences of heuristics. Homogeneous groups tend to reinforce their own thinking. Diversity mitigates this effects of peer pressure, which can be very powerful.
3. Independence. The people within the crowd act independently. They think for themselves and rely on their own information, own ideas. Our natural tendency to imitate and protect our reputation can move us away from this independence.
According to Surowiecki, one of the implications for market research is that you want to ask people not what they think of a product, but instead you want to ask the question: "How successful do you think this product is going to be?" or "How many people do you think will buy this product by February?"
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