The Wisdom of Crowds

Chapter 6: The Wisdom of Crowds

Cooperation & The Crowd

  • A good solution to cooperation requires people to take into account what everyone is collectively doing & you must in turn create a broader definition of self-interest
  •  Perspective: class discussions: if we don’t collectively cooperate with each other during class discussions, one of two things usually happen.
  • Everyone is talking at once and you get nothing from the conversation because you can’t hear what’s being said
  • Everyone is talking at once, you get nothing from the conversation because you’ve zoned out, and are resistant

If the mechanism of cooperation is right, coordination problems can be solved by the crowd even is each individual of that crowd is pursuing his or her own self-interest.

  • Example: Soccer: Italy v. South Korea (World Cup)
  • Italian fans did not blame the referee Byron Moreno for his incompetency (which they should have considering he made multiple poor decisions that in turn would have must likely given Italy the win) but instead Italian fans blamed Moreno for being criminal.
  • In Italy, defeat is never the outcome of a fair contest and in this country during soccer season, corruption is regularly assumed by the natural state of affairs.
  • SO, HOW does this relate to cooperation? “Making sure that games are both entertaining and compelling for the fans. The MORE interesting the game, the more likely it is people will come, the greater ticket sales are, and TV ratings will be…” (110)
  • In theory, the competing teams and referees are working together to produce entertainment. 

Cooperation & Reward

  • Put simply, people want there to be a relationship between accomplishment and reward. They want the result to be FAIR!
  • Example: in American society, we are more likely to believe that walth is the result of initiative and skill, while Europeans are far more likely to attribute it to luck. (115). WHY IS THAT? (Ask Class)
  • America- country of immigrant whose mentality was you have to work for what you have. Americans believe you can work your butt off and achieve such riches. Europe was already in a wealthy state and mentality is out of the culture of wealth: either you have it or you don’t, and if you “good for you.”
  • Story in book: Richard Grasso, was first CEO in American history to get fired for making too much money.
  • Worked for NYSE
  • NYSE planned on giving him lump sum of $139.5 mil of retirement benefits, differed pay, and bonuses- public freaked out, Grasso fired!

Why do we cooperate? (116)

  • Cooperation is the result of repeated interactions with the same people. “The foundation of cooperation is not really trust, but the durability of a relationship”.
  • stability in place to work from, confidence in commitment, and knowledge in how to produce (120)
  • Societies and organizations only can work if people cooperate.
  • What is most interesting is that we don’t regularly cooperate with those we know, instead we cooperate with strangers.

Cooperation is a game of trust- while all we can really trust is that the other person will recognize his or her self-intrest, over time, that reliance on his or her own attention to their self-interest becomes something more. It becomes a state of reliability and a willingness to cooperate

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