I’m not very convinced of the “wisdom of crowds.” There are numerous examples of how “the wisdom of crowds” is in fact the “idiocy of the mob.” Look at some political movements or some of the more extreme religions, for instance: a good few of these make no sense, but they have a lot of people who believe them. In Vanatu, an island in the Pacific, there is a cargo cult called the John Frum Cult that thinks building replicas of USA air force bases from World War II will bring the USA and all their goods back to the island. A lot of people believe this.

There is a lot of research from social psychology showing that groups polarize decisions in contrast to individuals. A group will make a more extreme decision (cautious or risky) than an individual. There is also the fact that estimations of physical sizes and weights will tend to show a normal distribution, with the most common estimate, the mode, being the correct one. Here there is wisdom in crowds, or more likely the wisdom of the normal distribution, the central limit theorem and statistics in general. Distributions are wonderful things.

One of the advantages of a large scale survey is that you are able to leverage a lot of people’s experience and knowledge. Recently, a company called “Netflix” in the USA utilized the web and their subscriber base to solve an interesting problem. While it is not the usual meaning of the term the “wisdom of crowds,” it is an example of how a crowd can solve a problem. Netflix (www.netflix.com) rents DVDs to their subscribers. They send the rentals via mail and their users maintain a list of which DVD’s they want. Netflix also tries to predict which DVDs people might like to watch based on the DVDs they have already rented. Amazon does a similar thing in making product recommendations to purchasers. Netflix wanted to improve their predictive algorithm by 10%, which is quite a large improvement. They could have tried to hire all sorts of geniuses, but they instead chose a very unique way to solve the problem. They set up a web site (www.netflixprize.com), posted a huge data set of movie DVDs, data about those movies, and subscriber choices. They then offered $1,000,000 to anyone who could improve their algorithm by 10%. There were two conditions: a deadline (September of 2009) and an agreement that anyone who submitted a solution had to document that solution publicly. Many companies allowed their employees to set up teams and compete, some individuals competed, and teams merged and re-formed over time. In the end there was a winning team: Bellkors Pragmatic Chaos.

In this case the wisdom was not “crowd think,” whatever that is. Instead, Netflix leveraged the web and all the people surfing it to source people who wanted to solve this problem. For Netflix, the $1,000,000 was cheap. They could never have afforded to hire all the people who took part in the contest. They got access to world-class computing facilities, superior minds, and  they received some great publicity as well.

The winning algorithm was a technique called a “Restricted Boltzmann Machine.” It proved that numbers and math matter. It wasn’t the crowd that solved the problem, but the crowd was the mechanism that made the solution possible. I’m inclined to think that this is the real wisdom of the crowd. People can come up with all sorts of strange beliefs; the ability to get people to address your problem is the wisdom of the crowd. It’s another example of how the web has changed the world in a radical way. Twenty years ago, it simply would not have been possible for Netflix to find a solution to their problem so gracefully. I hear there is going to be another Netflix contest. It’s nice that it was the math that was wise in the end….