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Learn about the collective opinion of a diverse and independent group of individuals rather than that of a single expert. Explore the history, examples, research, and applications of this phenomenon in various domains.
- What Is Wisdom of Crowds?
- Understanding Wisdom of Crowds
- Characteristics of a Wise Crowd
- Wisdom of Crowds in Financial Markets
- Advantages and Disadvantages of Wisdom of Crowds
- Examples of Wisdom of Crowds
- What Is the Difference Between Wisdom of Crowds and Crowdsourcing?
- What Is the Crowd Within?
- What Are Wisdom of Crowds Criticisms?
- The Bottom Line
Wisdom of crowds is the idea that
are collectively smarter than individual experts when it comes to problem-solving, decision-making, innovating, and predicting. The idea is that the viewpoint of an individual can inherently be biased, whereas taking the average knowledge of a crowd can result in eliminating the bias or noise to produce a clearer and more coherent result.
The theory is often applied to financial markets to show why markets in some instances operate efficiently and other times, inefficiently. Market participants in the crowd need to be diverse and have an incentive for markets to function efficiently.
Wisdom of crowds refers to the idea that large groups of people are collectively smarter than individual experts.
Wisdom of crowds was first popularized by
writer James Surowiecki in his 2004 book,
The wisdom of crowds concept was popularized by James Surowiecki in his 2004 book,
, which examines how large groups have made superior decisions in pop culture, psychology, biology,
The idea of wisdom of crowds can be traced back to Aristotle’s theory of collective judgment as presented in his work
He used a potluck dinner as an example, explaining that a group of individuals may come together to create a more satisfying feast for the group as a whole than what one individual might provide.
Crowds aren’t always wise. In fact, some can be the opposite. Take, for instance, frenzied investors who participate in a stock market
like the one that occurred in the 1990s with
According to Surowiecki, wise crowds have several key characteristics:
The crowd should be able to have a diversity of opinions.
One person’s opinion should remain independent of those around them (and should not be influenced by anyone else).
Anyone taking part in the crowd should be able to make their own opinion based on their individual knowledge.
The crowd should be able to aggregate individual opinions into one collective decision.
A 2018 study updated the wisdom of crowds theory by suggesting that crowds within an existing group are wiser than the group itself. The researchers called their results an improvement over the existing wisdom of crowds theory.
can also help explain what makes markets, which are a type of crowd, efficient at times and inefficient at others. If market participants are not diverse and if they lack incentives, then markets will be inefficient and an item’s price will be out of step with its value.
and columnist Barry Ritholtz argued that
), unlike markets for goods and services, lack the wisdom of crowds because they do not have a large or diverse pool of participants.
He points out that prediction markets failed spectacularly in trying to guess the outcomes of events such as the Greek referendum, the Michael Jackson trial, and the 2004 Iowa primary. The individuals trying to predict the outcomes of these events were simply guessing based on public polling data and did not have any special individual or collective knowledge.
Wisdom of crowds allows for diversity and a broad range of thinking. This provides more color and experience in problem-solving than that of an individual, which may often be biased. It also allows for the integration of information, whereby the vast knowledge of separate individuals creates a larger knowledge pool.
One of the main criticisms of the wisdom of crowds is that humans tend to conform, leading to "
By averaging together the individual guesses of a large group about the weight of an object, the answer may be more accurate than the guesses of experts most familiar with that object.
The collective judgment of a diverse group can compensate for the bias of a small group. In trying to guess the outcome of a World Series game, fans may be irrationally biased toward their preferred teams, but a large group that includes plenty of non-fans and individuals who dislike both World Series teams may be able to more accurately predict the winner.
Wisdom of the crowd is a theory that assumes large crowds are collectively smarter than individual experts. It believes that the collective knowledge and opinions of a group are better at decision-making, problem-solving, and innovating than an individual. Crowdsourcing is the process of gathering information, work, data, or opinions from a large g...
The crowd within theory states that the average of two estimates made by one individual is more accurate than a single estimate made from that same person. The theory seeks to prove that the overall idea of wisdom of crowds can be achieved through the crowd within.
One of the main criticisms of wisdom of crowds is that if the crowd itself is not particularly educated or diverse, then the outcome of the wisdom of the crowd will be no better and most often worse than that of an individual expert. The wisdom of crowds idea significantly depends on the quality of the crowd. In addition, humans tend to conform in ...
Wisdom of crowds is a theory that assumes that the knowledge of a crowd results in better decision-making, innovation, and problem-solving than that of an individual. A crowd needs to be large, diverse, and individuals within the crowd cannot be influenced by others for the theory to work. Wisdom of crowds can explain much of the efficiency and ine...
Dec 20, 2018 · One popular approach for navigating these questions is turning to the “wisdom of crowds” – asking many people for their opinions and suggestions, and then combining them to form the best ...
Jul 8, 2014 · The notion that a group’s judgement can be surprisingly good was most compellingly justified in James Surowiecki’s 2005 book The Wisdom of Crowds, and is generally traced back to an...
A book by James Surowiecki about the aggregation of information in groups, resulting in decisions that are often better than any single member. Learn about the types, criteria, failures, and applications of crowd wisdom, with examples from economics, psychology, and history.
- James Surowiecki
- 2004
Jan 31, 2013 · How do groups of animals solve problems that none of them can do alone? Iain Couzin studies the collective intelligence of shoals, flocks and swarms, and finds that they can track gradients in their environment by moving together.
May 8, 2023 · How can pooling large numbers of people’s estimates lead to surprisingly accurate answers? This article reviews the history, research, and applications of the wisdom of the crowd phenomenon, and explores how people can also harness their own inner crowd by averaging their guesses.
