In his fascinating book, The Wisdom of Crowds, James Surowieki puts forth a compelling thesis: Large groups of people are smarter than an elite few – a deceptively simple idea that has profound implications. Surowieki begins the book by sharing a statistic from one of the most popular game shows in television history. The goal of Who Wants to Be a Millionaire was simple: Answer 15 questions in a row and win a million bucks.
To make things even more interesting, the contestant was allowed to use one of three options when stumped by a question. First, by removing two of the four multiple-choice answers, he would have at least a fifty-fifty chance at picking the right answer. Or, if he preferred, he could phone an “expert” – a person the contestant had singled out in advance as the smartest person he knew. Lastly, the contestant could poll a studio audience that cast it votes by computer. As the author points out, most people would put their faith in the wisdom of an individual hand-picked for their intelligence over the wisdom of a random crowd of people with nothing better to do than spend a weekday afternoon in a TV studio. And while the “expert” was right 65% of the time, the random studio audience picked the right answer an amazing 91% of the time! Surowieki’s book offers compelling scientific evidence beyond a popular game show to support his theory but I think you get the point.
Through the unlimited power of social media the potential for harnessing the “wisdom of crowds” has never been greater. One would think that big business would be at the forefront of cultivating what Surowieki has identified as “decision markets.” Apparently, they still don’t get it. “The most mystifying thing about decision markets is how little interest corporate America has shown in them,” says Surowieki. “Corporate strategy is all about collecting information from many different sources, evaluating the probabilities of potential outcomes, and making decisions in the face of an uncertain future. These are the tasks for which decision markets are tailor-made.” And I might add that social media is tailor-made for advancing these “decision markets.”
Decision markets work because they create incentives for widely dispersed people to share information about which they feel a common interest. These incentives are what we have identified as conversational currency. Conversational currency promotes the leveraging of knowledge from many diverse and independent sources. The pursuit of conversational currency balances out mistakes and bypasses hierarchical restrictions on knowledge flow. The pursuit of conversational currency allows the efficient aggregation of a seemingly unmanageable mass of ideas and opinions.
As Surowieki says “under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.” The ramifications of this concept, if fully embraced, will significantly impact how businesses operate, how knowledge is advanced and how individuals live life itself.