‘Crowd Wisdom’ is a Fallacy

Has anyone ever needed the number of jellybeans in a jar estimated?

Introduction

Normally we talk about healthcare, healthcare finance or technology in this space.  Today is a little different.  Today we are going to discuss the fallacy of the wisdom of the crowd and how the “be nice” people of the world have convinced most of the rest of us that the more people you have on your team the better off you are.  We will prove in this article that simply isn’t true,and what you should be doing instead.

Origins of Crowd Wisdom.

First let’s discuss how we got here.

Francis Galton

In 1906 statistician Francis Galton attended a farmer's fair in Plymouth, England.  He witnessed a contest where the participants of the fair were asked to guess the weight of an ox after it was butchered and dressed.  There were 787 guesses and the average guess was 1197 pounds.  The correct answer was 1198 pounds.  The collective response of the crowd was closer than the actual winner of the contest.  This seemed to indicate that democracy of thought could produce amazing results.

Jack Traynor

In 1987 a finance professor, Jack Traynor, brought a jar into his class that held 850 jellybeans and asked the students to guess the number in the jar.  The average of the group’s estimate was 871, only about 2.5% off.  Only one of the 56 people was better than the group.  

In 2007 Michael Mauboussin, a did a similar experiment at the Columbia Business School and asked his 73 students to guess the number of jellybeans.  He also offered $20 for the best guess and a $5 penalty for the guess furthest from the correct answer.  The average guess of the class was 1,151 while the actual number of jellybeans was 1,116.  The consensus was off by about 3.1%.  Of the 73 estimates, only two were better than average.

James Surowiecki

In 2004, James Surowicki, a columnist for the New Yorker, penned “The Wisdom of the Crowds” which is probably where this fallacy got the steam it needed to worm its way into our discussion today.  In the book he relates several anecdotes, note that they are not studies, like the three we discussed earlier, where a sufficiently large and diverse group of people out performed all but the very top percentage of the individual, and in the case of the ox, the top performing individual.  

Why, Then, is Crowd Wisdom a Fallacy?

Let’s consider government first.  “Here is a group of people like the crowds we talked about earlier,except all superlative individuals, elected by a large crowd, like we talked about earlier, so they must be very wise, right? I submit  this article, “Unintended Consequences” in government that details 47 times government went horribly wrong and made everything worse for everyone.  This is a tongue in cheek look at the subject but yes, 47.  Go read it.  It is actually funny.

Let’s also consider business.   Business people are highly educated and trained, and people trust them so much they give them money to invest.  Here are a few of the hundreds of financial crises caused by bizdiots in the past century.  

• The Great Depression of 1929
• The 1973 Oil Crisis
• The Asian Financial Crisis of 1997
• The Dot Com Bubble of 2000
• The Argentine Economic Crisis (1999-2002)
• The 2008 Mortgage Crisis (The Great Recession) of 2008

The list goes on and on of how business people invested in things they didn’t understand and crashed national or global economies.  That is worse than inconvenient, these downturns kill people.

I will submit that the wisdom of the crowd is only valid when you have jellybeans to count, oxen to weigh or something similar.  Back in the desert of the real, if I want to know how many jellybeans are in a jar, I count them.  If I want to know how much butchered meat I get from an ox, I weigh it.  The entire premise is puerile and flawed and designed by the ‘be nice’ crowd to make you think they know something you do not.  Don’t listen to them

Groupthink Gone Wrong

The reason we should avoid this kind of groupthink is that guessing the number of jellybeans has no application in the real world.  We are attributing wisdom where there is none.  We are making decisions based on the conventional wisdom of a bunch of people who aren’t wise, either individually or in an unruly mob.  Speaking of unruly mobs, does any of this seem similar to, I don’t know the Salem Witch Trials?  200 people were accused, there, and 30 were executed.  

Iving Janis wrote about this phenomenon in his 1972 book “Victims of Groupthink a Psychological Study of Foreign-policy Decisions and Fiascoes.”  Here are 25 examples where this lack of critical thinking and literally following the mob created chaos.  

Ed Solomon’s character Agent K, said it best in 1997’s “Men in Black” when confronted with the assumption that people are smart, and can handle the truth:

“A person is smart.  People are dumb, panicky, dangerous animals and you know it.  1500 years ago everybody knew that the earth was the center of the universe.  500 years ago everybody knew the earth was flat.  …can you imagine what you’ll know tomorrow?”

So what is the answer?

The Light at the End of the Tunnel

While nothing great was ever accomplished by committee, there are any number of individual contributors that changed the world for the better.  Einstein, Maxwell, Watt, Hawking, Newton, the Curies, well, there were  two Curies but that counts.

Henry Ford infamously said “If I had asked my customers what they wanted they would have told me ‘a faster horse.’”  Pursuant to that, let's look at the same thing done at nearly the same time at the same company with two consecutive versions of the same car: the Mustang.

The Mustang I

Just four people plus a few fiberglass technicians are responsible for the concept, styling engineering and complete execution of the Mustang I. They were Eugene Bordinat, John Najjar, engineer Herb Misch and product planner Roy Lunn. The car body fabricator Troutman Barnes of Culver City, California.  Between 1960 and 1962 this small group designed and built a prototype that would be one of the great success stories in automotive history.

While this isn’t the car we remember from 1964 and later, this is the spiritual grandfather of the car we do remember and built for the same purposes.  This is a car that was built by a small team of enthusiastic, motivated, talented people with little overlap in talents and none in execution, that changed the car business.

The Mustang II

The Mustang II was a car designed by committee.  In 1971 Henry Ford II commissioned two new concepts for the upcoming 1974 Mustang: a shortened Makerick code named Ohio and a lengthened Pinto code named Arizona.  Henry had thousands of marketing research phone calls made and 200 hand picked customers were invited to view the two new concepts.  A few weeks later Henry repeated the exercise and another 700 people were invited.  The crowd like the Arizona better, so off old Henry went.  Month and years went by with no new car.  It kep getting stuck in bureaucracy.

The brass at Ford wrangled over engines and finally decided on the 102 HP 2.3L Lima engine as standard.  There was no option of a V8 at all.  This allowed them to finalize the bodywork, with the engine as a known quantity.  Then as the debut date approached, the engineering team couldn’t make the Mustang II ride or handle like it wasn’t a Pinto, because well, it was a Pinto.  Over a weekend the engineering team burned overtime and they settled on suspending the front suspension on rubber isolators called “hockey pucks” since they resembled those and it didn’t ride like a Pinto anymore, it certainly didn’t handle like a sports car.  

Two weeks before the new Mustang II was to shop, there was no provision for an engine.  Again the weekend overtime was burned and they cam up with more rubber isolators.  The engine was mounted to the isolator and the isolator was mounted to the car.  This combatted the buzzy, economy four cylinder feel of the car.  They called this solution ‘the toilet seat’ because that is what it looked like.  On Sunday evening they pulled the dirty ‘toilet seat’ out of the car and painted it yellow and presented the solution Monday morning.  Of course, having a solution was better than not having a solution, even a bad one, so it was approved.

Mustang buyers were underwhelmed by an economy hatchback with a four cylinder with hockey pucks and a toilet seat when what they expected was a firebreathing, tire smoking  pony car.  Some bought the Maverick.  Some bought the Pinto.  Most just left.

18,000 Mustang IIs were sold the first month where 22,000 1964 Mustangs were sold the first day.

Conclusions

I tell you these anecdotes so I can draw these conclusions:  First, you’ve been sold a bill of goods.  If crowds are good at guessing jellybean count or dressed ox weight, and I need those things estimated, I’ll go find a crowd.  Otherwise, crowds are for entertaining.  They don’t do anything, they have things done to them.  Second, results are achieved by smart, focused, enthusiastic individual contributors.  Even after the Second Continental Congress convened, Thomas Jefferson went home and singlehandedly wrote the Declaration of Independence.  He was even less than enthusiastic when the Congress “mangled his composition” by cutting and changing much of his carefully chosen wording.  

Great things are accomplished by great people with great vision.  Counting jellybeans is not a great thing, never has been a great thing and never will be a great, nor even worthy, thing.

I am not going to attempt to dictate how you should apply this in your life or enterprise.  Suffice it to say that warm bodies alone, different or otherwise, are not the answer.

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