Here are some of the points I covered for my presentation on Chapter 1: Wisdom of Crowds:
- The book starts off speaking about group intelligence, especially in the TV show “Who Wants To be a Millionaire?” and it’s “ask the audience” segment in comparison to “ask an expert or a friend” (Page 4).
- Chapter looks at various ways of tapping into what a group knows: stock prices, votes, point spreads, computer algorithms, and futures contracts
- All of these examples satisfy the four conditions of characterizing crowds:
1. Diversity of opinion-each person should have some private information.
2. Independence- people’s opinions are not determined by the opinions of those around them.
3. Decentralization- people are able to specialize and draw on local knowledge.
4. Aggregation- some mechanism exists for turning private judgment into a collective decision.
- “The idea of the Wisdom of Crowds is not that a group will always give you the right answer but that it will consistently come up with a better answer than any individual can provide”.