The Wisdom of Crowds

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pages: 326 words: 106,053

The Wisdom of Crowds by James Surowiecki

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AltaVista, Andrei Shleifer, asset allocation, Cass Sunstein, Daniel Kahneman / Amos Tversky, experimental economics, Frederick Winslow Taylor, George Akerlof, Howard Rheingold, I think there is a world market for maybe five computers, interchangeable parts, Jeff Bezos, Joseph Schumpeter, knowledge economy, lone genius, Long Term Capital Management, market bubble, market clearing, market design, moral hazard, new economy, offshore financial centre, Picturephone, prediction markets, profit maximization, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Toyota Production System, transaction costs, ultimatum game, Yogi Berra

THE WISDOM OF CROWDS WHY THE MANY ARE SMARTER THAN THE FEW AND HOW COLLECTIVE WISDOM SHAPES BUSINESS, ECONOMIES, SOCIETIES, AND NATIONS JAMES SUROWIECKI DOUBLEDAY New York London Toronto Sydney Auckland CONTENTS Cover Page Title Page Dedication Introduction PART I 1. The Wisdom of Crowds 2. The Difference Difference Makes: Waggle Dances, the Bay of Pigs, and the Value of Diversity 3. Monkey See, Monkey Do: Imitation, Information Cascades, and Independence 4. Putting the Pieces Together: The CIA, Linux, and the Art of Decentralization 5. Shall We Dance?: Coordination in a Complex World 6. Society Does Exist: Taxes, Tipping, Television, and Trust PART II 7. Traffic: What We Have Here Is a Failure to Coordinate 8. Science: Collaboration, Competition, and Reputation 9.

Yet despite all these limitations, when our imperfect judgments are aggregated in the right way, our collective intelligence is often excellent. This intelligence, or what I’ll call “the wisdom of crowds,” is at work in the world in many different guises. It’s the reason the Internet search engine Google can scan a billion Web pages and find the one page that has the exact piece of information you were looking for. It’s the reason it’s so hard to make money betting on NFL games, and it helps explain why, for the past fifteen years, a few hundred amateur traders in the middle of Iowa have done a better job of predicting election results than Gallup polls have. The wisdom of crowds has something to tell us about why the stock market works (and about why, every so often, it stops working). The idea of collective intelligence helps explain why, when you go to the convenience store in search of milk at two in the morning, there is a carton of milk waiting there for you, and it even tells us something important about why people pay their taxes and help coach Little League.

DOUBLEDAY and the portrayal of an anchor with a dolphin are registered trademarks of Random House, Inc. Some of the material in this book was originally published in different form in The New Yorker. Library of Congress Cataloging-in-Publication Data Surowiecki, James, 1967– The wisdom of crowds : why the many are smarter than the few and how collective wisdom shapes business, economies, societies, and nations / James Surowiecki. p. cm. Includes bibliographical references. 1. Consensus (Social sciences) 2. Common good. I. Title. JC328.2.S87 2003 303.3'8—dc22 2003070095 eISBN 0-307-27505-1 Copyright © 2004 by James Surowiecki All Rights Reserved www.anchorbooks.com v1.0 THE WISDOM OF CROWDS WHY THE MANY ARE SMARTER THAN THE FEW AND HOW COLLECTIVE WISDOM SHAPES BUSINESS, ECONOMIES, SOCIETIES, AND NATIONS JAMES SUROWIECKI DOUBLEDAY New York London Toronto Sydney Auckland

ucd-csi-2011-02 by Unknown

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bioinformatics, en.wikipedia.org, pattern recognition, The Wisdom of Crowds

We show that articles on sociologists (a well-curated part of Wikipedia) are very different to articles on footballers in the English Premiership. 1 Introduction While the impact and widespread uptake of Wikipedia is undeniable, the reliability of much of the content available on Wikipedia has been the subject of intense debate. Perhaps the epicentre of this debate has been the Nature article favorably comparing the quality of Wikipedia entries to those in the Encyclopædia Britannica [5] and the robust response to this article from the Britannica owners 1 . The truth is that sometimes Wikipedia is effective at harnessing the wisdom of crowds to produce excellent authoritative articles and sometimes Wikipedia articles are quite poor – often because they are not the result of much collaboration. The best Wikipedia content as represented by Featured Articles2 and A and even GA class articles on the Wikipedia Quality Scale reach a very high standard 3 . At the other end of the scale there is a vast array of Wikipedia content of dubious or poor quality.

We focus on the work related to Wikipedia here. In contrast to traditional encyclopedias, where authority derives from expert contributors, Wikipedia depends on collaboration and consensus to produce quality articles. There has been some controversial research that suggests that the quality of Wikipedia articles approaches that of established encyclopedias [5]. The famous quote from Surowiecki’s The Wisdom of Crowds is that ”under the right circumstances, groups are remarkably intelligent” [11]. The challenge when using Wikipedia is to determine whether the circumstances that produced the article in question were right or not. The first requirement for a Wikipedia article to be authoritative is the many eyes idea [8] – a significant group of contributors must have cooperated to produce the article. It is also important that this collaboration has been constructive and it is better if the authors have a reasonable reputation as contributors.

In In Proceedings of the 5th International Symposium on Online Journalism, pages 16–17, 2004. [9] B.D. McKay. Practical graph isomorphism. Congressus Numerantium, 30(30):47–87, 1981. [10] R. Milo, S. Itzkovitz, N. Kashtan, R. Levitt, S. Shen-Orr, I. Ayzenshtat, M. Sheffer, and U. Alon. Superfamilies of evolved and designed networks. Science, 303(5663):1538, 2004. [11] J. Surowiecki, M.P. Silverman, et al. The wisdom of crowds. American Journal of Physics, 75:190, 2007. 6


pages: 314 words: 94,600

Business Metadata: Capturing Enterprise Knowledge by William H. Inmon, Bonnie K. O'Neil, Lowell Fryman

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affirmative action, bioinformatics, business intelligence, business process, call centre, carbon-based life, continuous integration, corporate governance, create, read, update, delete, database schema, en.wikipedia.org, informal economy, knowledge economy, knowledge worker, semantic web, The Wisdom of Crowds, web application

It is on the mini-collectives that the traditional knowledge management discipline has focused its efforts. It seems, however, that the socialization of knowledge is much broader than mini-collectives. 6.5 Socialization of Knowledge 6.5.1.1 97 Knowledge Socialization and the Wisdom of Crowds Don Tapscott, in Wikinomics, uses the term collective intelligence, which he defines as “the aggregate knowledge that emerges from the decentralized choices and judgments of groups of independent participants” (Tapscott, 2006, p. 41). Tapscott also discusses James Surowiecki’s provocative book, The Wisdom of Crowds, in which Surowiecki proposes that a crowd or a group is usually more accurate than an expert alone. The subtitle of his book is Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations.

New York: Penguin Group, 2001. ✦ Amazon.com. Review of The Wisdom of Crowds. http://www.amazon.com/ Wisdom-Crowds-James-Surowiecki/dp/0385721706/sr=1-1/qid=1162589559/ ref=pd_bbs_sr_1/103-0890407-7574238?ie=UTF8&s=books 120 Chapter 6 Business Metadata Capture ✦ Dixon, Nancy M. Common Knowledge. Cambridge, MA: Harvard Business School Press, March 2000. ✦ McGuinness, Deborah. “Making Web Applications Trustable.” Semantic Technology Conference, March 2006. ✦ McQuade, James. “Combining Business Metadata Delivery with Knowledge Management.” DAMA International, 2005. ✦ Segal, Jonathan A. “Time Is on Their Side.” HR Magazine, February 2006. http://findarticles.com/p/articles/mi_m3495/is_2_51/ai_n16101872 ✦ Surowiecki, James. The Wisdom of Crowds. New York: Random House, 2004. ✦ Terdiman, Daniel. “Wikipedia under Fire.”

It is not merely a technology book, though we envision that the main audience will be made up of technology practitioners. It touches upon many trends evident in the use of technology today, by businesspeople and technical people alike. Although we will discuss traditional metadata technology, we will also venture into technology subjects such as: ✦ Web 2.0 ✦ “The Semantic Web” ✦ Collaboration and Groupware ✦ “The Wisdom of Crowds” ✦ Data Management and Governance The proper exploitation of business metadata, by both technologists and businesspeople, can revolutionize the use of technology, making it the facilitator of enterprise knowledge that it was always meant to be. Technology can lend assistance to how business metadata can enable business to be conducted on many levels, from facilitating communication and fostering true understanding to providing background information so that appropriate decisions can be made.

Infotopia: How Many Minds Produce Knowledge by Cass R. Sunstein

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affirmative action, Andrei Shleifer, availability heuristic, Build a better mousetrap, c2.com, Cass Sunstein, cognitive bias, cuban missile crisis, Daniel Kahneman / Amos Tversky, Edward Glaeser, en.wikipedia.org, feminist movement, framing effect, hindsight bias, Isaac Newton, Jean Tirole, jimmy wales, market bubble, market design, minimum wage unemployment, prediction markets, profit motive, rent control, Richard Stallman, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, slashdot, stem cell, The Wisdom of Crowds, winner-take-all economy

See Sergey Brin and Lawrence Page, “The Anatomy of a LargeScale Hypertextual Web Search Engine,” Computer Networks & ISDN System 30 (1998): 107–10, available at http://dbpubs .stanford.edu:8090/pub/1998–8. 6. Lorge et al., “A Survey of Studies Contrasting the Quality of Group Performance and Individual Performance, 1920–1957,” 344. 7. See Surowiecki, The Wisdom of Crowds, 5 (discussing jar experiment). Notes to Pages 17–24 / 233 8. Richard S. Bruce, “Group Judgments in the Field of Lifted Weights and Visual Discrimination,” Journal of Psychology 1 (1936): 117–21. 9. Surowiecki, The Wisdom of Crowds, xi–xiii. 10. Some affirmative evidence can be found in J. Scott Armstrong, “Combining Forecasts,” in Principles of Forecasting, ed. J. Scott Armstrong (Boston: Kluwer Academic, 2001), 419–20, 427, 433–35. 11. See William P. Bottom et al., “Propagation of Individual Bias through Group Judgment: Error in the Treatment of Asymmetrically Informative Signals,” Journal of Risk and Uncertainty 25 (2002): 152–54. 12.

Will the poverty rate, or concentrations of specified air pollutants, increase in the next year? Will a particular product sell? What will be the effect of a hurricane? Is a flu pandemic going to strike Europe? Will an endangered species recover? A great deal of evidence suggests that under certain conditions, a promising way to answer such questions is this: Ask a large number of people and take the average answer. As emphasized by James Surowiecki in his engaging and illuminating The Wisdom of Crowds, large groups can, in a sense, be wiser than experts.1 When the relevant conditions are met, the average answer, which we might describe as the group’s “statistical answer,” is often accurate, where accuracy is measured by reference to objectively demonstrable facts. Here’s one example: In 2004, members of the Society for American Baseball Research were asked to predict the winners of the baseball playoffs.2 Remarkably, strong majorities of the 413 respondents correctly predicted all of the first-round winners: New York, Boston, Houston, and / 21 St.

See Habermas, “Between Facts and Norms: An Author’s Reflections,” 940. 20. Friedrich Hayek, Law, Legislation, and Liberty, vol. 1: Rules and Order (Chicago: University of Chicago Press, 1973), 13. 21. See Russell Hardin, “The Crippled Epistemology of Extremism,” in Political Rationality and Extremism, ed. Albert Breton et al. (Cambridge, UK: Cambridge University Press, 2002), 3, 16. Chapter 1 / 1. See James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations (New York: Doubleday, 2004). 2. John Zajc, “This Week in SABR” (Society for American Baseball Research, Cleveland, Ohio), Oct. 9, 2004 (Results of playoff prediction survey), available at http://www.sabr.org/ sabr.cfm?a=cms,c,1123,3,212. 3. The story is told in “Kasparov Against the World,” http:// en.wikipedia.org/wiki/Kasparov_versus_The_World. 4.


pages: 369 words: 80,355

Too Big to Know: Rethinking Knowledge Now That the Facts Aren't the Facts, Experts Are Everywhere, and the Smartest Person in the Room Is the Room by David Weinberger

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airport security, Alfred Russel Wallace, Amazon Mechanical Turk, Berlin Wall, Black Swan, book scanning, Cass Sunstein, corporate social responsibility, crowdsourcing, Danny Hillis, David Brooks, Debian, double entry bookkeeping, double helix, en.wikipedia.org, Exxon Valdez, Fall of the Berlin Wall, future of journalism, Galaxy Zoo, Hacker Ethic, Haight Ashbury, hive mind, Howard Rheingold, invention of the telegraph, jimmy wales, John Harrison: Longitude, Kevin Kelly, linked data, Netflix Prize, New Journalism, Nicholas Carr, Norbert Wiener, openstreetmap, P = NP, Pluto: dwarf planet, profit motive, Ralph Waldo Emerson, RAND corporation, Ray Kurzweil, Republic of Letters, RFID, Richard Feynman, Richard Feynman, Ronald Reagan, semantic web, slashdot, social graph, Steven Pinker, Stewart Brand, technological singularity, Ted Nelson, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Whole Earth Catalog, X Prize

Just as James Surowiecki says, there is a type of expertise that can come from people who are in the same place without being any further organized. The Wisdom of Crowds opens with what is now the canonical example. At a county fair in the eighteenth century it was noticed that if you wanted to know how much a particular ox weighs, the average of the total guesses of fair-goers was likely to be closer than the estimate of any particular expert. Surowiecki’s book is careful to lay out the precise conditions under which crowds do better than experts—it depends on there being a diversity of opinion, independence, decentralization, and a way to derive a collective decision—but almost as soon as he published it, “the wisdom of crowds” was used to refer to everything from choosing presidents, to the making of best-selling fashions, to voting for your favorite on American Idol.

Before too long, it had lynched black men and torched the Colored Orphan Asylum on Fifth Avenue.10 So, it’s interesting that in the past few years we’ve grabbed onto the terms “crowd” and “mob” and applied them as positive characterizations of Internet sociality. Howard Rheingold’s Smart Mobs in 2003 applied the term to people connected through instantaneous digital communication,11 and James Surowiecki’s The Wisdom of Crowds12 in 2004 pointed to ways that unassociated groups of people can come up with more accurate answers than can individuals. Both books—each excellent—had titles that played upon our negative feelings about groups of people who are sharing space. “You see,” both books in effect said, “there’s a new positive potential in bringing big groups of strangers together.” Smart mobs and wise crowds represent only two ways that knowledge can be developed on the Internet, often simply by being connected.

Observer Online, January 26, 2006, http://www.northwestern.edu/observer/issues/2006/01/26/parenting.html. 9 David Riesman, Nathan Glazer, and Reuel Denney, The Lonely Crowd: A Study of the Changing American Character (Yale University Press, 1950). 10 The 233 children inside fled. See Leslie M. Harris, In the Shadow of Slavery: African Americans in New York City, 1626–1863 (University of Chicago Press: Chicago, 2004). An excerpt of the chapter titled “The New York City Draft Riots of 1863” can be found at http://www.press.uchicago.edu/Misc/Chicago/317749.html. 11 Howard Rheingold, Smart Mobs: The Next Social Revolution (Basic Books, 2003). 12 James Surowiecki, The Wisdom of Crowds (Random House, 2004). 13 Jeff Howe, “The Rise of Crowdsourcing,” Wired 14, no. 6 (June 2006), http://www.wired.com/wired/archive/14.06/crowds.html. See also Howe’s Crowdsourcing (Crown Business, 2008). 14 “Darpa Network Challenge: We Have a Winner,” https://network-challenge.darpa.mil/Default.aspx. 15 “How It Works” (MIT), 2009, http://balloon.mit.edu/mit/payoff/. 16 Darren Murph, “MIT-Based Team Wins DARPA’s Red Balloon Challenge, Demonstrates Power of Social Networks (and Cold Hard Cash),” December 6, 2009, http://www.engadget.com/2009/12/06/mit-based-team-wins-darpas-red-balloon-challenge-demonstrates/. 17 See Jonathan Zittrain’s “Minds for Sale” video at http://www.youtube.com/watch?


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, moral hazard, mortgage debt, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

PART II: THE FUNCTIONS OF FINANCE 5 Capital allocation Physical assets Housing Property and infrastructure Large companies Financing small and medium-size enterprises 6 The deposit channel Household wealth The payment system The activities of the deposit channel 7 The investment channel Stewardship A bias to action The role of the asset manager PART III: POLICY 8 Regulation The origins of financial regulation The Basel agreements Securities regulation The regulation industry What went wrong 9 Economic policy Maestro Financial markets and economic policy Pensions and inter-generational equity Consumer protection The British dilemma 10 Reform Principles of reform Robust systems and complex structures Other people’s money The reform of structure Personal responsibility 11 The future of finance Epilogue; The emperor’s guard’s new clothes Acknowledgements Notes Bibliography Index PROLOGUE The parable of the ox1 In 1906 the great statistician Francis Galton observed a competition to guess the weight of an ox at a country fair. Eight hundred people entered. Galton, being the kind of man he was, ran statistical tests on the numbers. He discovered that the average guess was extremely close to the weight of the ox. This story was told by James Surowiecki, in his entertaining book The Wisdom of Crowds.2 Not many people know the events that followed. A few years later, the scales seemed to become less and less reliable. Repairs would be expensive, but the fair organiser had a brilliant idea. Since attendees were so good at guessing the weight of an ox, it was unnecessary to repair the scales. The organiser would simply ask everyone to guess the weight, and take the average of their estimates.

The organiser would simply ask everyone to guess the weight, and take the average of their estimates. A new problem emerged, however. Once weight-guessing competitions became the rage, some participants tried to cheat. They even tried to get privileged information from the farmer who had bred the ox. But there was fear that, if some people had an edge, others would be reluctant to enter the weight-guessing competition. With few entrants, you could not rely on the wisdom of crowds. The process of weight discovery would be damaged. So strict regulatory rules were introduced. The farmer was asked to prepare three-monthly bulletins on the development of his ox. These bulletins were posted on the door of the market for everyone to read. If the farmer gave his friends any other information about the beast, that information was also to be posted on the market door. And anyone who entered the competition who had knowledge about the ox that was not available to the world at large would be expelled from the market.

We do not fly an aeroplane by consensus of the views of the passengers: instead we put our trust in a highly trained, skilled and well-informed pilot. The failure of the mortgage market is only the most conspicuous example of the consequences of replacing knowledgeable intermediation in favour of the supposed ‘wisdom of crowds’.6 The aggregation of inconsequential information across large numbers of people amounts not to the ‘wisdom of crowds’ but to not very much at all: the more so since the opinions that are aggregated are not independently formed. The crowds that clamoured for the crucifixion of Jesus, watched the tumbrels roll to the guillotine and stood to attention at Nuremberg rallies were not wise, but baying mobs reinforcing the ignorant opinions of their neighbours. The trader typically knows very little about the underlying characteristics of the securities he or she trades, but a great deal about other traders, and what they currently think.


pages: 400 words: 94,847

Reinventing Discovery: The New Era of Networked Science by Michael Nielsen

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Albert Einstein, augmented reality, barriers to entry, bioinformatics, Cass Sunstein, Climategate, Climatic Research Unit, conceptual framework, dark matter, discovery of DNA, double helix, Douglas Engelbart, en.wikipedia.org, Erik Brynjolfsson, fault tolerance, Fellow of the Royal Society, Firefox, Freestyle chess, Galaxy Zoo, Internet Archive, invisible hand, Jane Jacobs, Jaron Lanier, Kevin Kelly, Magellanic Cloud, means of production, medical residency, Nicholas Carr, publish or perish, Richard Feynman, Richard Feynman, Richard Stallman, semantic web, Silicon Valley, Silicon Valley startup, Simon Singh, Skype, slashdot, social web, statistical model, Stephen Hawking, Stewart Brand, Ted Nelson, The Death and Life of Great American Cities, The Nature of the Firm, The Wisdom of Crowds, University of East Anglia, Vannevar Bush, Vernor Vinge

Furthermore, we don’t yet have a good understanding of how the human brain works, so the metaphor is in any case of limited use at best. If we’re going to understand how to amplify collective intelligence, we need to look beyond the metaphor of the collective brain. Many books and magazine articles have been written about collective intelligence. Perhaps the best-known example of this work is James Surowiecki’s 2004 book The Wisdom of Crowds, which explains how large groups of people can sometimes perform surprisingly well at problem solving. Surowiecki opens his book with a striking story about the scientist Francis Galton. In 1906, Galton was attending an English country fair, and among the fair’s attractions was a weight-judging contest, where people competed to guess the weight of an ox. Galton expected that most of the competitors would be far off in their estimates, and was surprised to learn that the average of all the competitors’ guesses (1,197 pounds) was just one pound short of the correct weight of 1,198 pounds.

Galton expected that most of the competitors would be far off in their estimates, and was surprised to learn that the average of all the competitors’ guesses (1,197 pounds) was just one pound short of the correct weight of 1,198 pounds. In other words, collectively, if one averaged the guesses, the crowd at the fair guessed the weight almost perfectly. Surowiecki’s book goes on to discuss many other ways we can combine our collective wisdom to surprisingly good effect. This book goes beyond The Wisdom of Crowds and similar works in two ways. First, our goal is to understand how online tools can actively amplify collective intelligence. That is, we’re not just interested in collective intelligence, per se, but in how to design tools that dramatically increase collective intelligence. Second, we’re not just discussing everyday problems like estimating the weight of an ox. Instead, our focus is on problems at the limit of human problem-solving ability, problems like competing with Garry Kasparov at the peak of his chess-playing might, or smashing mathematical problems that challenge the world’s best mathematicians.

The projects we’ve discussed have overcome these and similar problems: some have succeeded with flying colors (the Polymath Project), while others just barely succeeded (World Team deliberations sometimes teetered on the edge of breakdown because of lack of civility). Similar problems also afflict offline groups, and much has been written about the problems and how to overcome them—including books such as James Surowiecki’s The Wisdom of Crowds, Cass Sunstein’s Infotopia, and many other books about business and organizational behavior. While these practical problems are important, they can often be solved with good process. But no matter how good the process, there remains a fundamental dividing line: whether a shared praxis is available. In fields where a shared praxis is available we can scale collective intelligence, and get major qualitative improvements in problem-solving behavior, such as designed serendipity and conversational critical mass.


pages: 502 words: 107,657

Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die by Eric Siegel

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Albert Einstein, algorithmic trading, Amazon Mechanical Turk, Apple's 1984 Super Bowl advert, backtesting, Black Swan, book scanning, bounce rate, business intelligence, business process, call centre, computer age, conceptual framework, correlation does not imply causation, crowdsourcing, dark matter, data is the new oil, en.wikipedia.org, Erik Brynjolfsson, experimental subject, Google Glasses, happiness index / gross national happiness, job satisfaction, Johann Wolfgang von Goethe, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Moneyball by Michael Lewis explains big data, Nate Silver, natural language processing, Netflix Prize, Network effects, Norbert Wiener, personalized medicine, placebo effect, prediction markets, Ray Kurzweil, recommendation engine, risk-adjusted returns, Ronald Coase, Search for Extraterrestrial Intelligence, self-driving car, sentiment analysis, software as a service, speech recognition, statistical model, Steven Levy, text mining, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Turing test, Watson beat the top human players on Jeopardy!, X Prize, Yogi Berra

The predictive capacity of the mass mood expressed by bloggers at large to foresee stock market behavior, as covered in Chapter 3 (in fact, related work comes from MIT’s aptly named Center for Collective Intelligence). Human minds aren’t the only things that can be effectively merged together. It turns out the aggregate effect emerging from a group extends also to nonhuman crowds—of predictive models. The Wisdom of Crowds . . . of Models The “wisdom of crowds” concept motivates ensembles because it illustrates a key principle of ensembling: Predictions can be improved by averaging the predictions of many. —Dean Abbott, Abbott Analytics Like a crowd of people, an ensemble of predictive models benefits from the same “collective intelligence” effect.5 Each model has its strengths and weaknesses. As with guesses made by people, the predictive scores produced by models are imperfect.

The Big Bad Wolf The End of the Rainbow Prediction Juice Far Out, Bizarre, and Surprising Insights Correlation Does Not Imply Causation The Cause and Effect of Emotions A Picture Is Worth a Thousand Diamonds Validating Feelings and Feeling Validated Serendipity and Innovation Investment Advice from the Blogosphere Money Makes the World Go ‘Round Putting It All Together Chapter 4: The Machine That Learns (modeling) Boy Meets Bank Bank Faces Risk Prediction Battles Risk Risky Business The Learning Machine Building the Learning Machine Learning from Bad Experiences How Machine Learning Works Decision Trees Grow on You Computer, Program Thyself Learn Baby Learn Bigger Is Better Overlearning: Assuming Too Much The Conundrum of Induction The Art and Science of Machine Learning Feeling Validated: Test Data Carving Out a Work of Art Putting Decision Trees to Work for Chase Money Grows on Trees The Recession—Why Microscopes Can’t Detect Asteroid Collisions After Math Chapter 5: The Ensemble Effect (ensembles) Casual Rocket Scientists Dark Horses Mindsourced: Wealth in Diversity Crowdsourcing Gone Wild Your Adversary Is Your Amigo United Nations Meta-Learning A Big Fish at the Big Finish Collective Intelligence The Wisdom of Crowds . . . of Models A Bag of Models Ensemble Models in Action The Generalization Paradox: More Is Less The Sky’s the Limit Chapter 6: Watson and the Jeopardy! Challenge (question answering) Text Analytics Our Mother Tongue’s Trials and Tribulations Once You Understand the Question, Answer It The Ultimate Knowledge Source Artificial Impossibility Learning to Answer Questions Walk Like a Man, Talk Like a Man A Better Mousetrap The Answering Machine Moneyballing Jeopardy!

At the very end of a multiple-year competition, BellKor’s Pragmatic Chaos had uploaded its winning entry just 20 minutes before The Ensemble. The winning team received the cash and the other team received nothing. Netflix CEO Reed Hastings reflected, “That 20 minutes was worth a million dollars.” Collective Intelligence With most things, the average is mediocrity. With decision making, it’s often excellence. — James Surowiecki, The Wisdom of Crowds Even competitions much simpler than a data mining contest can tap the wisdom held by a crowd. The magic of collective intelligence was lightheartedly demonstrated in 2012 at the Predictive Analytics World (PAW) conference. Charged with drawing attention to his analytics company on the event’s exposition floor, Gary Panchoo held a money-guessing contest. Here he is, collecting best guesses as to how many dollar bills are in the container: The guessers as a group outsmarted every individual guess.


pages: 532 words: 139,706

Googled: The End of the World as We Know It by Ken Auletta

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23andMe, AltaVista, Anne Wojcicki, Apple's 1984 Super Bowl advert, bioinformatics, Burning Man, carbon footprint, citizen journalism, Clayton Christensen, cloud computing, Colonization of Mars, corporate social responsibility, death of newspapers, disintermediation, don't be evil, facts on the ground, Firefox, Frank Gehry, Google Earth, hypertext link, Innovator's Dilemma, Internet Archive, invention of the telephone, Jeff Bezos, jimmy wales, Kevin Kelly, knowledge worker, Long Term Capital Management, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Network effects, new economy, Nicholas Carr, PageRank, Paul Buchheit, Peter Thiel, Ralph Waldo Emerson, Richard Feynman, Richard Feynman, Sand Hill Road, Saturday Night Live, semantic web, sharing economy, Silicon Valley, Skype, slashdot, social graph, spectrum auction, stealth mode startup, Stephen Hawking, Steve Ballmer, Steve Jobs, strikebreaker, telemarketer, the scientific method, The Wisdom of Crowds, Upton Sinclair, X Prize, yield management

What does anyone think of this camera?’” It’s the wisdom of crowds—your crowd of friends. “Google is just focused on CPU—central processing computers—and ignores the processing of the human brain.” He believes this makes its search vulnerable. Google obviously has come to share this concern for a senior Google executive confirms that they tried—and failed—to acquire Twitter. Search Engine Land’s Danny Sullivan identifies another variation of this threat. “If I were Google I’d be worried about vertical searches,” he said—searches that tap the knowledge of experts. Jason Calacanis, a Web entrepreneur, started a niche search engine, Mahalo.com. The problem with horizontal search, Calacanis said, is that it spews out too much information and assumes that the most linked sites are best. “The ‘wisdom of crowds’ is great to find trends,” but there is such a “mob” of voices on the Web that search results produce too much useless information.

The top salary of $450,000 was paid equally to the other members of the executive committee, who in most cases received bonues equal to 150 percent of their salary. Most employees are invited to share the riches. Google projected that stock option grants to employees in 2008 would total $1.1 billion. These grants confer millionaire status on many Googlers. Google’s approach to users is also egalitarian, from its reliance on “the wisdom of crowds” approach to search results to its demonstrated faith in “open source” systems. It is a close-knit culture. Google is not egalitarian about sharing information with outsiders. Ask just about any Googler basic questions—How many searches does Google perform each day? How many of its employees are non-Americans? What is the starting salary of engineers?—and you’ll receive a robotic, “We don’t disclose those numbers for competitive reasons.”

It would be a mistake to ascribe Google’s success to the generic category of engineers. Larry Page brilliantly conceived search, and Sergey Brin’s math skills were vital to its success. But Google also succeeded because it forged teams of engineers who were not territorial, who formed a network, communicating and sharing ideas, constantly trying them out in beta tests among users, relying on “the wisdom of crowds” to improve them. Building communities of engineers and hackers and users was the ethos they shared. They believed it was virtuous to share, for it embraced the construct framed by Eric Steven Raymond in a paper originally presented at a conference of Linux developers in 1997, “The Cathedral and the Bazaar.” Instead of a solitary engineering wizard crafting software as if it were a cathedral and releasing it when perfected, Raymond argued that the Linux model was more like “a great babbling bazaar” that would ignite the creativity of communities of engineers and users.


pages: 411 words: 80,925

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

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Airbnb, barriers to entry, Bernie Madoff, bike sharing scheme, Buckminster Fuller, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, George Akerlof, global village, Hugh Fearnley-Whittingstall, information retrieval, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Parkinson's law, peer-to-peer lending, Ponzi scheme, pre–internet, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, Zipcar

This same dynamic fuels the success of Amazon, product reviewer site Epinions, and entertainment recommendations site Yelp. When you sign up, you become part of a hub that gives you access to the knowledge of millions of other users. The notion that the collective intelligence of thousands, even millions, of people can produce the results and knowledge that smaller groups and individuals can’t has been much discussed, probably best in James Surowiecki’s book The Wisdom of Crowds. But what’s new is applying collective intelligence to make product service systems more attractive than individual ownership. The in-depth knowledge accumulated through repeated consumer interactions presents a significant opportunity for businesses to form deeper relationships with customers and manage inventory more efficiently. Through the familiar “My Queue,” Netflix knows what its members want to watch next.

They wanted to share chores such as grocery shopping, but how would they know who wanted what and when? Meeting to decide these things would defeat the purpose of making life easier. And they didn’t want to create any kind of committee or nominate a leader to organize the effort, as that would be resorting back to the kind of centralized authority they were trying to avoid. As James Surowiecki writes in The Wisdom of Crowds, “How can people voluntarily—that is, without anyone telling them what to do—make their actions fit together in an efficient and orderly way?”24 With this need in mind, Stephanie launched the online version of the venture, WeCommune.com, in early 2009. A simple yet innovative platform, it makes it easier for people to come together and share resources in ways that fit into modern lifestyles.

The Culture of the New Capitalism (Yale University Press, 2006). Shirky, Clay. Here Comes Everybody: The Power of Organizing Without Organizations (Penguin, 2008). Slade, Giles. Made to Break: Technology and Obsolescence in America (Harvard University Press, 2006). Stiglitz, Joseph. Making Globalization Work (W. W. Norton & Company., 2007). Strasser, Susan. Waste and Want: A Social History of Trash (Henry Holt, 1999). Surowiecki, James. The Wisdom of Crowds (Anchor Books, 2005). Tapscott, Don, and Anthony D. Williams. Wikinomics: How Mass Collaboration Changes Everything (Portfolio, 2008). Thackara, John. In the Bubble: Designing in a Complex World (MIT Press, 2006). Thaler, Richard, and Cass R. Sunstein. Nudge: Improving Decisions About Health, Wealth, and Happiness (Penguin, 2009). Tomasello, Michael. Why We Cooperate (MIT Press, 2009).


pages: 230 words: 61,702

The Internet of Us: Knowing More and Understanding Less in the Age of Big Data by Michael P. Lynch

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Affordable Care Act / Obamacare, Amazon Mechanical Turk, big data - Walmart - Pop Tarts, bitcoin, Cass Sunstein, Claude Shannon: information theory, crowdsourcing, Edward Snowden, Firefox, Google Glasses, hive mind, income inequality, Internet of things, John von Neumann, meta analysis, meta-analysis, Nate Silver, new economy, patient HM, prediction markets, RFID, sharing economy, Steve Jobs, Steven Levy, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, WikiLeaks

To name the most obvious: the more rankings, the more reliable we tend to take the average score to be (1,000 rankings with an average of 4 stars is far more impressive than three rankings of 4.5 stars). Of course, we also know that the fact that many people like something doesn’t mean we’ll like it too. The fact that we so often trust such rankings—at least, in the right conditions—points out that we already tend to abide by the main lesson of James Surowiecki’s 2004 landmark book The Wisdom of Crowds. Surowiecki’s point was that in certain conditions, the aggregated answers of large groups could be wiser—could display more knowledge—than an individual, even an individual expert. Suroweicki’s most famous example comes from the work of Francis Galton, a British scientist. Galton examined a competition in which 787 contestants at a country fair estimated the weight of an ox. The average of all guesses was 1,197 pounds.

Perhaps all the examples show is that individuals, in so far as they are group members, can be implicitly or tacitly committed to a proposition that no group member is committed to as an individual. After all, the interviewer example presumes that the tacit commitment in question is itself a product of the individuals’ beliefs. If so, then perhaps the best we can say is that what we can loosely call the group’s implicit commitment “supervenes” or is a product of the individuals’ commitments. 8. Surowiecki, The Wisdom of Crowds, xii. 9. David Leonhardt, “When the Crowd Isn’t Wise,” New York Times, July 7, 2012. 10. Nate Silver, “The Virtues and Vices of Election Prediction Markets,” New York Times, October 24, 2012. 11. I was helped to see these points in discussions with Sandy Goldberg and Nate Sheff. The example in the text is similar to that in Goldberg, “The Division of Epistemic Labor,” 117. 12. Weinberger, Too Big to Know, 21. 13.

Krakauer. “Motor Skill Depends on Knowledge of Facts.” Frontiers in Human Neuroscience 7 (2013): 1–11. Strawson, P. F. Freedom and Resentment and Other Essays. New York and London: Routledge, 1998. Sunstein, Cass R. Infotopia: How Many Minds Produce Knowledge. New York: Oxford University Press, 2006. _________. Republic.com 2.0. Princeton: Princeton University Press, 2009. Surowiecki, James. The Wisdom of Crowds. New York: Random House, 2005. Turkle, Sherry. Alone Together: Why We Expect More from Technology and Less from Each Other. New York: Basic Books, 2012. Uhlmann, Eric L., David Pizarro, David Tannenbaum, and Peter Ditto. “The Motivated Use of Moral Principles.” Judgment and Decision Making 4, no. 6 (2009): 476–91. Weinberger, D. Too Big to Know: Rethinking Knowledge Now That the Facts Aren’t the Facts, Experts Are Everywhere, and the Smartest Person in the Room Is the Room.


pages: 327 words: 103,336

Everything Is Obvious: *Once You Know the Answer by Duncan J. Watts

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affirmative action, Albert Einstein, Amazon Mechanical Turk, Black Swan, butterfly effect, Carmen Reinhart, Cass Sunstein, clockwork universe, cognitive dissonance, collapse of Lehman Brothers, complexity theory, correlation does not imply causation, crowdsourcing, death of newspapers, discovery of DNA, East Village, easy for humans, difficult for computers, edge city, en.wikipedia.org, Erik Brynjolfsson, framing effect, Geoffrey West, Santa Fe Institute, happiness index / gross national happiness, high batting average, hindsight bias, illegal immigration, interest rate swap, invention of the printing press, invention of the telescope, invisible hand, Isaac Newton, Jane Jacobs, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, lake wobegon effect, Long Term Capital Management, loss aversion, medical malpractice, meta analysis, meta-analysis, Milgram experiment, natural language processing, Netflix Prize, Network effects, oil shock, packet switching, pattern recognition, performance metric, phenotype, planetary scale, prediction markets, pre–internet, RAND corporation, random walk, RFID, school choice, Silicon Valley, statistical model, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, The Death and Life of Great American Cities, the scientific method, The Wisdom of Crowds, too big to fail, Toyota Production System, ultimatum game, urban planning, Vincenzo Peruggia: Mona Lisa, Watson beat the top human players on Jeopardy!, X Prize

But in the case of prediction markets, the prices are explicitly interpreted as making a prediction about the outcome in question—for example, the probability of an Obama victory on the eve of Election Day was predicted by the Iowa Electronic Markets to be 92 percent. In generating predictions like this one, prediction markets exploit a phenomenon that New Yorker writer James Surowiecki dubbed the “wisdom of crowds”—the notion that although individual people tend to make highly error-prone predictions, when lots of these estimates are averaged together, the errors have a tendency to cancel out; hence the market is in some sense “smarter” than its constitutents. Many such markets also require participants to bet real money, thus people who know something about a particular topic are more likely to participate than people who don’t.

As a result, ratings analysts and traders alike collectively placed too low a probability on a nationwide drop in real-estate values, and so badly underestimated the risk of mortgage defaults and foreclosure rates.14 At first, it might seem that this would have been a perfect application for prediction markets, which might have done a better job of anticipating the crisis than all the “quants” working in the banks. But in fact it would have been precisely these people—along with the politicians, government regulators, and other financial market specialists who also failed to anticipate the crisis—who would have been participating in the prediction market, so it’s unlikely that the wisdom of crowds would have been any help at all. Arguably, in fact, it was precisely the “wisdom” of the crowd that got us into the mess in the first place. So if models, markets, and crowds can’t help predict black swan events like the financial crisis, then what are we supposed to do about them? A second problem with methods that rely on historical data is that big, strategic decisions are not made frequently enough to benefit from a statistical approach.

American Sociological Review 12 (1):11–12. Sun, Eric, Itamar Rosenn, Cameron A. Marlow, and Thomas M. Lento. 2009. “Gesundheit! Modeling Contagion Through Facebook News Feed.” Third International Conference on Weblogs and Social Media, at San Jose, CA. AAAI Press. Sunstein, Cass R. 2005. “Group Judgments: Statistical Means, Deliberation, and Information Markets.” New York Law Review 80 (3):962–1049. Surowiecki, James. 2004. The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations. New York: Doubleday. Svenson, Ola. 1981. “Are We All Less Risky and More Skillful Than Our Fellow Drivers?” Acta Psychologica 47 (2):143–48. Tabibi, Matt. 2009. “The Real Price of Goldman’s Giganto-Profits.” July 16 http://trueslant.com/ Taleb, Nassim Nicholas. 2001. Fooled by Randomness.


pages: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

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4chan, airport security, anti-communist, anti-pattern, barriers to entry, Bill Duvall, bitcoin, blockchain, business climate, business intelligence, business process, Chelsea Manning, clean water, congestion charging, Corn Laws, correlation does not imply causation, cryptocurrency, Debian, Edward Snowden, failed state, financial independence, Firefox, full text search, German hyperinflation, global village, GnuPG, Google Chrome, greed is good, Hernando de Soto, hiring and firing, informal economy, invisible hand, James Watt: steam engine, Jeff Rulifson, Julian Assange, Kickstarter, M-Pesa, mutually assured destruction, Naomi Klein, national security letter, new economy, New Urbanism, Occupy movement, offshore financial centre, packet switching, patent troll, peak oil, pre–internet, private military company, race to the bottom, rent-seeking, reserve currency, RFC: Request For Comment, Richard Feynman, Richard Feynman, Richard Stallman, Satoshi Nakamoto, security theater, Skype, slashdot, software patent, spectrum auction, Steve Crocker, Steve Jobs, Steven Pinker, Stuxnet, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trade route, transaction costs, union organizing, web application, WikiLeaks, Y2K, zero day, Zipf's Law

It has never been so fluid, so large scale, so effective. In this chapter, I'll explore how successful on-line communities work. More than that, I'll show how to build them, the shining digital cities of our future. The Wisdom of Crowds Niccolo Machiavelli observed, in "Discourses on the First Decade of Titus Livius" that: "As for prudence and stability of purpose, I affirm that a people is more prudent, more stable, and of better judgment than a prince. Nor is it without reason that the voice of the people has been likened to the voice of God; for we see that wide-spread beliefs fulfill themselves, and bring about marvelous results." In his book "The Wisdom of Crowds," James Surowiecki wrote, "under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them." He noted that a collective intelligence usually produces better outcomes than a small group of experts, even if members of the crowd do not know all the facts or choose, individually, to act irrationally.

The Digital Revolution The Counter-Revolution Today Creating the Future Chapter 1. Magic Machines From Bricks to Bits Cost Gravity and the Digital Petri Dish The First Law A Brief History of the Internet What Drives Digital Society? Of Mice and Dinosaurs The Establishment Under Assault It's All in the Remix The Lost Continent Gets On Line The Asynchronous Society The Economic Quickening From Innocence to Authority Chapter 2. Spheres of Light The Wisdom of Crowds Wiser and More Constant than a Prince Origins of Social Architecture The Toolbox Sidebars The Collective Intelligence Index, or CII Final Thoughts Chapter 3. Faceless Societies Humanity as a Wise Crowd Sports Break The Face in the Mirror The Borgia Hypothesis Natural Born Killers Stupid, Mad, or Bad Sporting Colors Stupidity is Not Random Society Versus the Individual How The Bandit Got His Gang From Bandits to Bakers Fixing the Sick Men Summing Up Chapter 4.

Of all the websites in the world, one is precious beyond any measure, and becoming more so every day, and that is Wikipedia. Any attempt to describe how important and valuable Wikipedia is would fail by understatement. As a species, we only really have two fundamental assets: ourselves, and our knowledge. When I scored Wikipedia in “Spheres of Light”, it hit 96%. Wikipedia is not perfect, though it comes close. This isn't accidental -- it was practically founded on the principles of the wisdom of crowds. The one area it does not handle perfectly is current events -- politics, sports, news -- where there is still money at stake. Wikipedia is the ultimate in collective property, the antithesis of private property with its strong rights, de jure protection, profits, and friction. It is the ultimate slap in the face to the right-wing economists and their belief that wealth comes from individuals rather than society.


pages: 265 words: 15,515

Nomad Citizenship: Free-Market Communism and the Slow-Motion General Strike by Eugene W. Holland

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capital controls, cognitive dissonance, Colonization of Mars, complexity theory, deskilling, Firefox, Frederick Winslow Taylor, full employment, informal economy, invisible hand, Jane Jacobs, means of production, microcredit, money: store of value / unit of account / medium of exchange, Naomi Klein, New Urbanism, peak oil, price mechanism, Richard Stallman, Ronald Coase, slashdot, The Death and Life of Great American Cities, The Wisdom of Crowds, transaction costs, Upton Sinclair, urban renewal, wage slave, working poor

On the basis of extensive historical studies, Fernand Braudel has pro­ posed an Important distinction between markets and antimarkets that can serve as one point of departure.38 Along similar lines, but on the basis of M arx’s theoretical investigations, Deleuze and Guattari distinguished be­ tween the positive, economic component of markets and their negative, power component.39 More specifically, James Surowiecki, in his recent work The Wisdom of Crowds, lays out the conditions under which largescale interactive systems such as markets can produce surprising results in the domains of coordination and cooperation as well as cognition.40 The prerequisites for the wisdom of crowds to emerge, as he shows, include diversity and independence of knowledge or opinion, decentralization of decisions, and some mechanism to aggregate multiple decisions to pro­ duce a result—prerequisites that truly free free markets often realize. Surowiecki’s analysis thus provides important components of the concept of free-market communism, as we will see in chapter 4.

What if, in other words, market agents routinely took into account not just personal desires and price information but infor­ mation regarding products’ circumstances of production, conditions of distribution, environmental impact, and so on? The result of the aggrega­ tion mechanism of the market would then be more than mere efficiency: it would be an aggregated version of the Common Good. Like the free, open-source software movement, Wikipedia, or the NASA clickworkers discussed in the previous chapter, a nomad market intentionally oriented to the Common Good in this way would harness what James Surowiecki has called the wisdom of crowds.47 The resultant definition of the Com­ mon Good would, of course, always be an approximation, never perfec­ tion itself. And it would not constitute the kind of explicitly agreed-on ultimate end that, for von Hayek, signals the death of liberal society. N o­ mad market agents would be free to pursue their particular ends, as long as this pursuit is coupled with pursuit of their particular versions of the Common Good, with the market producing a continually aggregated and reaggregated approximation of a collective version of the Common Good.

But it turned out that currency markets, too, can operate perfectly well without a standard of value (although they are subject to volatility when subject to the disproportionate antimarket power of certain players). Here it is crucial to distinguish between money as a means of circulation and as a standard of evaluation.131 In nomad markets, money functions solely as a means of circulation, and evaluation is not tied to a standard but left to free-market mechanisms of distributed intelligence and the “wisdom of crowds.”132 Once free from the standard of labor-value, nomad markets evaluate collectively, allocate time and resources, and do the other (in von Hayek’s words) “marvelous” things they do, in response to a range of consider­ ations informing aggregate demand and supply. Of course, even capital­ ist markets must respond in some degree to consumer demand. But the antimarket power of large firms effectively subordinates all other crite­ ria to the anticipated return on investment for which credit was miracu­ lously issued in the first place.


pages: 432 words: 85,707

QI: The Third Book of General Ignorance (Qi: Book of General Ignorance) by John Lloyd, John Mitchinson

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Albert Einstein, British Empire, California gold rush, cognitive dissonance, dark matter, double helix, epigenetics, Johann Wolfgang von Goethe, music of the spheres, out of africa, Ronald Reagan, The Wisdom of Crowds, trade route

His experiments with pigs failed miserably, and he was forced to conclude that his work had raised more questions than it answered. Towards the end of his long life he wrote, ‘We are surrounded – nay crushed – by a mass of details demanding explanation.’ Today most neuroscientists would say we still are. Why should you rely on the ‘wisdom of crowds’? You shouldn’t. The growing consensus among mathematicians and statisticians is that the ‘wisdom of crowds’ – the idea that lots of people can produce a better answer than a few people – is a myth. Charles Darwin’s cousin Francis Galton carried out the archetypal wisdom-of-crowds experiment in 1906. He went to a village fair and offered a prize to whoever could guess the weight of an ox. No one, including the experienced farmers, came close individually but the average of all 787 submitted guesses was exactly the beast’s actual weight.

Name a piece of music written by Henry VIII What was the main event in a medieval tournament? Why was the Colosseum called the Colosseum? What is the name of the Queen’s official residence? How many English kings named Henry have there been? What dynasty did Henry VII and Henry VIII belong to? Which king of Scotland succeeded Macbeth? Which dog stood by his master’s grave for 14 years? How did Pavlov get dogs to salivate? Why should you rely on the ‘wisdom of crowds’? Why should you avoid feral pigeons? How hot does water have to be to wash the bacteria off your hands? What would happen if the world suddenly stopped spinning? What is the deepest canyon in the USA? Where is the world’s tallest statue of Jesus Christ? What species of tree is the tallest ever? Which way do sunflowers face? What colour is a robin’s breast? Could you beat the king of dinosaurs at an arm wrestle?

Crowd judgments can be improved by diversity. A 2004 study showed that a varied group of problem-solvers made a better collective guess than a group of like-minded ‘experts’. It seems that if you want to improve the accuracy of a crowd’s estimate, add individuals who hold opinions that are actively opposed to the general consensus. It’s possible that the statisticians currently debunking the ‘wisdom of crowds’ are themselves a crowd whose judgments are suspect because they listen to each other. Though, paradoxically, that would be an argument both for and against the concept … Why should you avoid feral pigeons? Don’t bother – they’re not as germy as you think. Despite much scaremongering about pigeons, there’s almost nothing you can catch from them. Pigeons do carry diseases – like cats, dogs and every other animal on Earth – but cases of them infecting humans are extremely rare.


pages: 224 words: 64,156

You Are Not a Gadget by Jaron Lanier

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1960s counterculture, accounting loophole / creative accounting, additive manufacturing, Albert Einstein, call centre, cloud computing, crowdsourcing, death of newspapers, digital Maoism, Douglas Hofstadter, Extropian, follow your passion, hive mind, Internet Archive, Jaron Lanier, jimmy wales, John Conway, John von Neumann, Kevin Kelly, Long Term Capital Management, Network effects, new economy, packet switching, PageRank, pattern recognition, Ponzi scheme, Ray Kurzweil, Richard Stallman, Silicon Valley, Silicon Valley startup, slashdot, social graph, stem cell, Steve Jobs, Stewart Brand, Ted Nelson, telemarketer, telepresence, The Wisdom of Crowds, trickle-down economics, Turing test, Vernor Vinge, Whole Earth Catalog

What is crucial about modernity is that structure and constraints were part of what sped up the process of technological development, not just pure openness and concessions to the collective. This is an idea that will be examined in Chapter 10. An Odd Lack of Curiosity The “wisdom of crowds” effect should be thought of as a tool. The value of a tool is its usefulness in accomplishing a task. The point should never be the glorification of the tool. Unfortunately, simplistic free market ideologues and noospherians tend to reinforce one another’s unjustified sentimentalities about their chosen tools. Since the internet makes crowds more accessible, it would be beneficial to have a wide-ranging, clear set of rules explaining when the wisdom of crowds is likely to produce meaningful results. Surowiecki proposes four principles in his book, framed from the perspective of the interior dynamics of the crowd. He suggests there should be limits on the ability of members of the crowd to see how others are about to decide on a question, in order to preserve independence and avoid mob behavior.

America in Dreamland Meanwhile, the United States has chosen a different path entirely. While there is a lot of talk about networks and emergence from the top American capitalists and technologists, in truth most of them are hoping to thrive by controlling the network that everyone else is forced to pass through. Everyone wants to be a lord of a computing cloud. For instance, James Surowiecki in The Wisdom of Crowds extols an example in which an online crowd helped find gold in a gold mine even though the crowd didn’t own the gold mine. There are many forms of this style of yearning. The United States still has top universities and corporate labs, so we’d like the world to continue to accept intellectual property laws that send money our way based on our ideas, even when those ideas are acted on by others.

Blindside: How to Anticipate Forcing Events and Wild Cards in Global Politics by Francis Fukuyama

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Asian financial crisis, banking crisis, Berlin Wall, Bretton Woods, British Empire, capital controls, Carmen Reinhart, cognitive bias, cuban missile crisis, energy security, flex fuel, income per capita, informal economy, invisible hand, John von Neumann, Menlo Park, Mikhail Gorbachev, moral hazard, Norbert Wiener, oil rush, oil shale / tar sands, oil shock, packet switching, RAND corporation, Ray Kurzweil, reserve currency, Ronald Reagan, The Wisdom of Crowds, trade route, Vannevar Bush, Vernor Vinge, Yom Kippur War

Information markets can help make sense of the “wisdom of crowds.” Analyst reports can target underlying, quantifiable trends. In many situations, from national security to corporate competitive intelligence, secret information is often valued over publicly available or open-source information, which may be marginalized or ignored altogether. A portfolio theory of collecting information, however, emphasizes using a multiplicity of data sources—both public and private. But the integration of all that disparate information ultimately relies upon the intuitive judgments of the human mind. 2990-7 ch09 schwarz 100 7/23/07 12:12 PM Page 100 peter schwartz and doug randall In an interview with us, James Surowiecki, New Yorker business columnist and author of The Wisdom of Crowds, noted three open-source ways to find relevant data and opinions outside of one’s most familiar frame of reference: discover unfamiliar terrain on the Internet; take high-quality but undervalued academic work and transport it to a different environment where it can be of high value; and read outside your field of expertise to find potentially useful metaphors and conceptual insights.2 When multiple sources are used and interpreted together, we have found that it is easier to separate the signal from the noise.

Fidler,“From International Sanitary Conventions to Global Health Security: The New International Health Regulations,” Chinese Journal of International Law 4, no. 2 (2005): 325–92. 2. Mark S. Smolinski, Margaret A. Hamburg, and Joshua Lederberg, eds., Microbial Threats to Health: Emergence, Detection, and Response (Washington: National Academies Press, 2003), p. 8. Chapter Nine 1. George Kennan, “The Sources of Soviet Conduct,” Foreign Affairs (July 1947); the article was published under the pseudonym “X.” 2. James Surowiecki, The Wisdom of Crowds (New York: Random House, 2004). 3. Robert William Fogel, The Fourth Awakening and the Future of Egalitarianism (University of Chicago Press, 2000). For examples of Bellah’s writings, see Beyond Belief: Essays on Religion in a Post-Traditional World, 2nd ed. (University of California Press, 1991); The Broken Covenant, 2nd ed. (University of Chicago Press, 1992). 4. Peter Schwartz and Doug Randall, “An Abrupt Climate Change Scenario and Its Implications for United States National Security” (Emeryville, Calif.: Global Business Network, October 2003).


pages: 464 words: 117,495

The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management by Alexander Elder

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additive manufacturing, Atul Gawande, backtesting, Benoit Mandelbrot, buy low sell high, Checklist Manifesto, deliberate practice, diversification, Elliott wave, endowment effect, loss aversion, mandelbrot fractal, margin call, offshore financial centre, paper trading, Ponzi scheme, price stability, psychological pricing, quantitative easing, random walk, risk tolerance, short selling, South Sea Bubble, systematic trading, The Wisdom of Crowds, transaction costs, transfer pricing, traveling salesman, tulip mania

Their key feature has to be independent decision making. This concept is clearly explained in a book, The Wisdom of Crowds, by a financial journalist James Surowiecki. He acknowledges that members of most groups constantly influence one another, creating waves of shared feelings and actions. A smart group is different: all members make independent decisions without knowing what others are doing. Instead of impacting each other and creating emotional waves, members of an intelligent group benefit from combining their knowledge and expertise. The function of a group leader is to maintain this structure and to bring individual decisions up for a vote. In 2004, a year prior to reading The Wisdom of Crowds, I organized a group of traders along those lines. I continue to manage it with my friend Kerry Lovvorn—the SpikeTrade group.

The site is built to encourage communication—except for weekends, when everyone must work independently. The results of leading group members, posted on the site, have been spectacular. The key point is that all decisions about stock selection and direction must be made in solitude, without seeing what the leaders or other members are doing. The sharing begins after all votes are in. This combination of independent decision making with sharing brings forth “the wisdom of crowds,” tapping the collective wisdom of the group and its leaders. ■ 15. Psychology of Trends Each price represents a momentary consensus of value among market participants. Each tick reflects the latest vote on the value of a trading vehicle. Any trader can “put in his two cents worth” by giving an order to buy or sell, or by refusing to trade at the current level. Each price bar or candle reflects a battle between bulls and bears.

Plummer, Tony, Forecasting Financial Markets (London: Kogan Page, 1989). Pring, Martin J., Technical Analysis Explained, 5th ed. (New York: McGraw-Hill, 2013). Rhea, Robert, The Dow Theory (New York: Barron's, 1932). Shapiro, Roy, Why Johnny Can't Sell Losers: Psychological Roots, unpublished article, 1991. Steidlmayer, J., Peter, and Kevin Koy, Markets & Market Logic (Chicago: Porcupine Press, 1986). Surowiecki, James, The Wisdom of Crowds (Anchor, 2005). Stoller, Manning, Personal communication, 1988. Teweles, Richard J., and Frank J. Jones, The Futures Game, 2nd ed. (New York: McGraw-Hill, 1987). Twelve Steps and Twelve Traditions (New York: Alcoholics Anonymous World Services, 1952). Vince, Ralph, Portfolio Management Formulas (Hoboken, NJ: John Wiley & Sons, 1990). Weissman, Richard L., Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis (Hoboken, NJ: John Wiley & Sons, 2004).


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

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affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, colonial rule, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Plutocrats, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, women in the workforce

Despite that, if I hold an auction for the value of the coins in a jar, offering to write a check to the winning bidder for whatever that value is, I am almost guaranteed to make big money, because at least one bidder will be too optimistic. It’s the winner’s curse in action. That is not because the auction produces some odd psychological quirk. It’s because while the survey of the crowd will produce the average view of the value of coins, the auction will not. Instead, the auction automatically selects the highest bid, the crazier the better. The survey uncovers what New Yorker columnist James Surowiecki calls “the wisdom of crowds.” The auction, by contrast, finds the biggest sucker. Rational players, knowing this, would dramatically scale back their bids. They would reason like this: “I think the value of the coins in the jar is twenty dollars. So maybe I should bid eighteen dollars to leave some room for profit. But wait: Either I lose the auction, in which case it doesn’t matter what my bid was, or I win the auction, in which case a hundred other people in this room thought it was worth less than twenty dollars.

For example, when I learned how to write a decent book proposal and where to send it, all Stephen McGroarty got in repayment from me was a pint or two of Guinness, and possibly the vague sense that I owed him a favor. Another example: After I knew my book was to be published, I started to make a habit of attending book talks to pick up some tips for the forthcoming promotional tour. It cost me nothing at all to receive a lesson in how to give a book talk from James Surowiecki, author of The Wisdom of Crowds, at my local Barnes & Noble. It’s hard to imagine how he might try to charge soon-to-be authors to hear his book talks while letting mere potential buyers of his own tome through the doors for nothing. Neither service is as easy to package and market as a hot dog. That means there exist potentially publishable authors with lousy proposals and potentially eloquent authors who are insufficiently skilled in the art of book talks, but there isn’t anyone with two dollars in his pocket and an unfulfillable desire for a hot dog.

The age of rational poker: My sources for the Chris Ferguson story include my conversations with Ferguson around the 2005 World Series of Poker; Kaplan and Reagan, Aces and Kings; and James McManus, Positively Fifth Street (New York: Farrar, Straus & Giroux, 2003). McManus was in Las Vegas to write an article for Harper’s magazine and ended up at the final table with Cloutier and Ferguson. If I ask each of a large number: See James Surowiecki, The Wisdom of Crowds (Boston: Little, Brown, 2004). Even professional soccer players: Ignacio Palacios-Huerta, “Professionals Play Minimax,” Review of Economic Studies 70, no. 2(2003): 395–415, and Tim Harford, “Keep Them Guessing,” FT Magazine, June 17, 2006. It turns out that: “What Do Laboratory Experiments Tell Us About the Real World?,” Steven D. Levitt and John A. List, University of Chicago and NBER, June 27, 2006, pricetheory.uchicago.edu/levitt/Papers/jep% 20revision%20Levitt%20&%20List.pdf.


pages: 299 words: 91,839

What Would Google Do? by Jeff Jarvis

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23andMe, Amazon Mechanical Turk, Amazon Web Services, Anne Wojcicki, barriers to entry, Berlin Wall, business process, call centre, cashless society, citizen journalism, clean water, connected car, credit crunch, crowdsourcing, death of newspapers, disintermediation, diversified portfolio, don't be evil, fear of failure, Firefox, future of journalism, Google Earth, Googley, Howard Rheingold, informal economy, inventory management, Jeff Bezos, jimmy wales, Kevin Kelly, Mark Zuckerberg, moral hazard, Network effects, new economy, Nicholas Carr, PageRank, peer-to-peer lending, post scarcity, prediction markets, pre–internet, Ronald Coase, search inside the book, Silicon Valley, Skype, social graph, social software, social web, spectrum auction, speech recognition, Steve Jobs, the medium is the message, The Nature of the Firm, the payments system, The Wisdom of Crowds, transaction costs, web of trust, Y Combinator, Zipcar

This reliance on data as the proxy for the will of the people is so ingrained in Google’s culture that it even supersedes organizational politics. “We rely so much on the data and we do so much measurement that you don’t have to worry that your idea will get picked because you’re the favorite,” Mayer said. “Data is apolitical.” Google has faith in data because it has faith in us. When you take to heart the moral of James Surowiecki’s 2004 book, The Wisdom of Crowds, you must realize that your crowd—your users, customers, voters, students, audience, neighbors—is wise. The next questions should be: How do you capture and act on that wisdom? How do you listen? How do you enable them to share their wisdom with each other and with you? How do you help them make you smarter (and why should they bother)? Do you have the systems in place to hear? Do you have the culture in place to act on what you hear?

Air travel’s business model today is based on overselling seats, billing us for checking bags, charging for pillows and pretzels and just about everything they can think of but air, jamming planes to the point of torture, treating customers as prisoners who can be kept on runways for hours without the food and water an inmate is allowed, and withholding information—all the while raising prices. Google couldn’t fix that. No one could. But then I applied Google rules about connections and the wisdom of crowds with Zuckerberg’s law of elegant organization and my own first law and asked how travelers on planes, trains, and ships or in hotels and resorts could be given more control (of anything but the cockpit, of course). And I wondered, what if passengers on a plane were networked? What if a flight became a social experience with its own economy? Start here: Most of us are connected to the internet on the ground.

See vendor relationship management Waghorn, Rick, 56 Wales, Jimmy, 60, 87 Wall Street Journal, 129 Wal-Mart, 54–55, 101 Washlet, 181 Wattenberg, Laura, 233 Weinberger, David, 3, 82, 96–97, 137, 149, 232 Westlaw, 224 widgets, 36–37 Wikia, 60 Wikileaks.org, 92–93 Wikinomics (Tapscott), 113, 151, 225 Wikipedia communities and, 50 growth of, 66 mistakes in, 92–93 open-source and, 60 speed of, 106 wikitorials, 86–87 Williams, Evan, 105–6 Williams, Raymond, 63 Wilson, Fred, 35, 176, 189–92, 225, 237 Wine.com, 158 WineLibrary.TV, 157 The Winner Stands Alone (Coelho), 142 Wired, 33 wireless access, 166 airlines and, 182–83 wireless spectrum, 166 The Wisdom of Crowds (Surowiecki), 88 The Witch of Portobello (Coelho), 142–43 WNYC, 128 Wojcicki, Anne, 205 Wolf, Maryanne, 235 World Economic Forum, 48, 113 Wyman, Bob, 211 Yahoo, 5, 36, 58 China and, 99–100 communities and, 50 Yang, Jerry, 36 Y Combinator, 193 youth, 191–94, 212 YouTube, 6, 20, 33, 37 Zappos, 161 Zara, 103–4 Zazzle, 180 Zell, Sam, 129 zero-based budgeting, 79–80 Zillow, 75, 80, 187 Zipcar, 176 Zopa, 196 Zuckerberg, Mark, 4, 48–53, 94–95 About the Author Jeff Jarvis is the proprietor of one of the Web’s most popular and respected blogs about the internet and media, Buzzmachine.com.


pages: 313 words: 84,312

We-Think: Mass Innovation, Not Mass Production by Charles Leadbeater

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1960s counterculture, Andrew Keen, barriers to entry, bioinformatics, c2.com, call centre, citizen journalism, clean water, cloud computing, complexity theory, congestion charging, death of newspapers, Debian, digital Maoism, double helix, Edward Lloyd's coffeehouse, frictionless, frictionless market, future of work, game design, Google Earth, Google X / Alphabet X, Hacker Ethic, Hernando de Soto, hive mind, Howard Rheingold, interchangeable parts, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jean Tirole, jimmy wales, John von Neumann, Kevin Kelly, knowledge economy, knowledge worker, lone genius, M-Pesa, Mark Zuckerberg, Marshall McLuhan, Menlo Park, microcredit, new economy, Nicholas Carr, online collectivism, planetary scale, post scarcity, Richard Stallman, Silicon Valley, slashdot, social web, software patent, Steven Levy, Stewart Brand, supply-chain management, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Whole Earth Catalog, Zipcar

Several books heavily influenced my thinking, including Ilkka Tuomi’s Networks of Innovation, Steven Weber’s The Success of Open Source, Yochai Benkler’s The Wealth of Networks, Henry Chesbrough’s Open Innovation, Steve Johnson’s Emergence, Carliss Baldwin and Kim Clark’s Design Rules, Eric von Hippel’s Democratizing Innovation, C. K. Prahalad and Venkat Ramaswamy’s The Future of Competition, Scott Page’s The Difference, James Surowiecki’s The Wisdom of Crowds and Chris Anderson’s The Long Tail. The other books, papers and articles I have drawn on are listed in the bibliography. Should you think that is incomplete, you can go to the wiki version of the book and add in your own references and links. Many of the ideas were developed through projects I worked on with other people or by speaking at seminars and workshops. Those people include: Carol Coletta at Ceos for Cities in Chicago; Cathy Brickman and her team at Virtuel Platform, Joeri van Steenhoven at Knowledge Land, Frans Nauta and Michiel Schwartz, all in Amsterdam; Cecilie With and everyone else involved with InnoTown in Ålesund in Norway; John Hartley, Stuart Cunningham and their team at Queensland University of Technology in Brisbane; Jimmy Wales and others at Wikimedia Foundation; Rowena Young and Anthony Hopwood of the Saïd Business School; Valerie Hannon and the team at the Department for Education’s Innovation Unit; Ed Miliband, Dominic Maxwell, Ben Jupp and Campbell Robb at the Cabinet Office and the Office of the Third Sector; David Miliband and Ravi Gurumurthy at the Foreign and Commonwealth Office; James Wilsdon, Paul Miller, Molly Webb and Kirsten Bound, my colleagues in the Atlas of Ideas project at Demos; Tom Bentley, formerly of Demos and now a government adviser in Melbourne; John Craig, chief executive of the Innovation Exchange; Geoff Mulgan at the Young Foundation and Tom Steinberg at My Society; Hilary Cottam, Colin Burns and Jennie Winhall, my colleagues at Participle; Jonathan Kestenbaum and Richard Halkett at the National Endowment for Science, Technology and the Arts where I am a visiting fellow; Kirstin Undheim, trend analyst at Opinion Bengal in Oslo; Polly LaBarre and Bill Taylor, authors of Mavericks at Work; Tom Kenyon Slaney and everyone else at the London Speaker Bureau for helping to arrange most of my speaking engagements; and Ed Mayo, Philip Cullum and Sue Johnston at the National Consumer Council for sponsoring my work on user-driven innovation.

Available from http://www.upgrade-cepis.org/ issues/2005/3/up6-3Amor.pdf 10 Steven Weber, The Success of Open Source (Cambridge, MA/London: Harvard University Press, 2004) 11 Thomas Kuhn, The Structure of Scientific Revolutions (University of Chicago Press, 1962), p. 10 12 Richard K. Lester and Michael Piore, Innovation: The Mission Dimension (Cambridge, MA/London: Harvard University Press, 2004) 13 Andrew Hargadon, How Breakthroughs Happen (Boston, MA: HBS Press, 2003) 14 James Surowiecki, The Wisdom of Crowds (Little, Brown, 2004) 15 Scott E. Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (Princeton University Press, 2007) 16 Bart Nooteboom, Learning and Innovation in Organizations and Economies (Oxford University Press, 2000) 17 Steven Weber, The Success of Open Source (Cambridge, MA/London: Harvard University Press, 2004) 18 Articles by Lakhani, Ghosh and Lerner in Joseph Feller, Brian Fitzgerald, Scott A.

., Douglas Griffin and Patricia Shaw, Complexity and Management (Routledge, 2002) Stebbins, Robert A., Amateurs, Professionals, and Serious Leisure (Montreal/Kingston: McGill-Queen’s University Press, 1992) Steil, Ben, David G. Victor, and Richard R. Nelson (Eds), Technological Innovation & Economic Performance (Princeton University Press, 2002) Sunstein, Cass, Republic.com (Princeton University Press, 2001) Surowiecki, James, The Wisdom of Crowds (Little, Brown, 2004) Sutton, Robert I., Weird Ideas that Work (Penguin, 2001) Tapscott, Don, and Antony D. Williams, Wikinomics: How Mass Collaboration Changes Everything (Penguin, 2007) Taylor, Charles, The Ethics of Authenticity (Cambridge, MA: Harvard University Press, 1991) Taylor, Charles, Sources of the Self: The Making of the Modern Identity (Cambridge University Press, 1992) Taylor, William C., and Polly LaBarre, Mavericks at Work: Why the Most Original Minds in Business Win (HarperCollins, 2006) Teece, David J., Gary Pisano and Amy Shuen, ‘Dynamic Capabilities and Strategic Management’ Strategic Management Journal, 18.7, pp. 509–33, 1997 Thackara, John, In the Bubble (Cambridge, MA/London: MIT Press, 2005) Trippi, Joe, The Revolution Will Not Be Televised (New York: HarperCollins, 2004) Tuomi, Ilkka, Networks of Innovation (Oxford University Press, 2002) Turner, Fred, From Counterculture to Cyberculture (University of Chicago Press, 2006) Vaidhyanathan, Siva, The Anarchist in the Library: How the Clash Between Freedom and Control Is Hacking the Real World and Crashing the System (New York: Basic Books, 2004) Volberda, Henk W., Building the Flexible Firm (New York: Oxford University Press, 1998) Von Hippel, Eric, ‘Horizontal Innovation Networks – By and For Users’, MIT Sloan School of Management Working Paper No. 4366–02 (2002) Von Hippel, Eric, Democratizing Innovation (Cambridge, MA/London: MIT Press, 2005) Von Hippel, Eric, Christian Luthje and Cornelius Herstatt, ‘The Dominant Role of “Local” Information in User Innovation: The Case of Mountain Biking’, MIT Sloan School of Management Working Paper (2002) Von Hippel, Eric, and Georg von Krogh, ‘Open Source Software and the Private-Collective Innovation Model: Issues for Organization Science’, Organization Science (2003) Von Hippel, Eric, The Sources of Innovation (Oxford University Press, 1995) Waldman, Simon, ‘Who Knows?’


pages: 407 words: 103,501

The Digital Divide: Arguments for and Against Facebook, Google, Texting, and the Age of Social Netwo Rking by Mark Bauerlein

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Amazon Mechanical Turk, Andrew Keen, centre right, citizen journalism, collaborative editing, computer age, computer vision, corporate governance, crowdsourcing, David Brooks, disintermediation, Frederick Winslow Taylor, Howard Rheingold, invention of movable type, invention of the steam engine, invention of the telephone, Jaron Lanier, Jeff Bezos, jimmy wales, Kevin Kelly, knowledge worker, late fees, Mark Zuckerberg, Marshall McLuhan, means of production, meta analysis, meta-analysis, Network effects, new economy, Nicholas Carr, PageRank, pets.com, Results Only Work Environment, Saturday Night Live, search engine result page, semantic web, Silicon Valley, slashdot, social graph, social web, software as a service, speech recognition, Steve Jobs, Stewart Brand, technology bubble, Ted Nelson, The Wisdom of Crowds, Thorstein Veblen, web application

There are more than 100,000 open source software projects listed on SourceForge.net. Anyone can add a project, anyone can download and use the code, and new projects migrate from the edges to the center as a result of users putting them to work, an organic software adoption process relying almost entirely on viral marketing. The lesson: Network effects from user contributions are the key to market dominance in the Web 2.0 era. Blogging and the Wisdom of Crowds One of the most highly touted features of the Web 2.0 era is the rise of blogging. Personal home pages have been around since the early days of the Web, and the personal diary and daily opinion column around much longer than that, so just what is the fuss all about? At its most basic, a blog is just a personal home page in diary format. But as Rich Skrenta notes, the chronological organization of a blog “seems like a trivial difference, but it drives an entirely different delivery, advertising and value chain.”

First, because search engines use link structure to help predict useful pages, bloggers, as the most prolific and timely linkers, have a disproportionate role in shaping search engine results. Second, because the blogging community is so highly self-referential, bloggers paying attention to other bloggers magnify their visibility and power. The “echo chamber” that critics decry is also an amplifier. If it were merely an amplifier, blogging would be uninteresting. But like Wikipedia, blogging harnesses collective intelligence as a kind of filter. What James Suriowecki calls “the wisdom of crowds” comes into play, and much as PageRank produces better results than analysis of any individual document, the collective attention of the blogosphere selects for value. While mainstream media may see individual blogs as competitors, what is really unnerving is that the competition is with the blogosphere as a whole. This is not just a competition between sites, but a competition between business models.

(“Most people assume the fights are going to be the left vs. the right,” Wales has said, “but it always is the reasonable versus the jerks.”) The jerks range from the Chinese government to the giant penis guy. But mostly they’re regular contributors who get upset about some hobbyhorse and have to be talked down or even shamed by their communities. Although he professes to hate phrases like “swarm intelligence” and “the wisdom of crowds,” Wales’s phenomenal success springs largely from his willingness to trust large aggregations of human beings to produce good outcomes through decentralized, marketlike mechanisms. He is suspicious of a priori planning and centralization, and he places a high value on freedom and independence for individuals. He is also suspicious of mob rule. Most Wikipedia entries, Wales notes, are actually written by two or three people, or reflect decisions made by small groups in the discussion forums on the site.


pages: 219 words: 63,495

50 Future Ideas You Really Need to Know by Richard Watson

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23andMe, 3D printing, access to a mobile phone, Albert Einstein, artificial general intelligence, augmented reality, autonomous vehicles, BRICs, Buckminster Fuller, call centre, clean water, cloud computing, collaborative consumption, computer age, computer vision, crowdsourcing, dark matter, dematerialisation, digital Maoism, Elon Musk, energy security, failed state, future of work, Geoffrey West, Santa Fe Institute, germ theory of disease, happiness index / gross national happiness, hive mind, hydrogen economy, Internet of things, Jaron Lanier, life extension, Marshall McLuhan, megacity, natural language processing, Network effects, new economy, oil shale / tar sands, pattern recognition, peak oil, personalized medicine, phenotype, precision agriculture, profit maximization, RAND corporation, Ray Kurzweil, RFID, Richard Florida, Search for Extraterrestrial Intelligence, self-driving car, semantic web, Skype, smart cities, smart meter, smart transportation, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, strong AI, Stuxnet, supervolcano, telepresence, The Wisdom of Crowds, Thomas Malthus, Turing test, urban decay, Vernor Vinge, Watson beat the top human players on Jeopardy!, web application, women in the workforce, working-age population, young professional

One issue, for example, is why some medical records still held by medical institutions are often on paper. This is slowly changing, but until we achieve a shift in attitudes relating to who has access to what and in what format, this will act against not only the generation and transmission of knowledge by small groups of patients, but will also prevent the occurrence of larger network effects (i.e. “the wisdom of crowds”). “This artificial distinction between a consumer and a producer is dissolving, I call it the participant economy. Web 2.0 is about people.” David Sifry, Technorati But does user-generated medicine or “open-source health” really have a future? On the one hand, you’d think that privacy issues alone would prevent any meaningful exchange of knowledge, but this doesn’t seem to be an issue.

Products and experiences that were once largely rationed, or communally accessed, are increasingly becoming available to individuals. Digitalization, for example, means that many products and experiences can now be personalized to suit the whims and wishes of individual users. Your problem is mine Open innovation, an idea originally pioneered by the open-source software community, has the potential to radically change how and where our problems are solved. In one sense the wisdom of crowds is no different from old-fashioned suggestion boxes, but the big difference is scale and to some extent speed. With enough networked minds, all problems become shallow. Linked to this idea is another, namely collaborative consumption. This is the use of connecting technologies to allow people to share and exchange all kinds of physical and digital goods, services, assets and skills. Media is an example.


pages: 218 words: 44,364

The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations by Ori Brafman, Rod A. Beckstrom

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Atahualpa, barriers to entry, Burning Man, disintermediation, experimental economics, Firefox, Francisco Pizarro, jimmy wales, Kibera, Lao Tzu, Network effects, pez dispenser, shareholder value, Silicon Valley, Skype, The Wisdom of Crowds, union organizing

BECKSTROM ADVANCE P R A I S E FOR THE STARFISH AND THE SPIDER "The Starfish and the Spider is a compelling and important book, rich with examples of how decentralization is fundamental to the right environment—one that promotes equal access, rich connections, and 'skin in the game' for participants." — P I E R R E O M I D Y A R , CEO, Omidyar Network; f o u n d e r and chairman, eBay Inc. "The Starfish and the Spider, like Blink, The Tipping Point, and The Wisdom of Crowds before it, showed me a provocative new way to look at the world and at business. It's also fun to read!" — R O B I N W O L A N E R , author of Naked in the Boardroom "A fantastic read. Constantly weaving stories and connections. You'll never see the world the same way again." —NICHOL AS J. NICHOL AS JR., former co-CEO, Time Warner "A must-read. Starfish are changing the face of business and society.

—PAUL SAFFO, di r ec t or , Institute f o r the Future "The Starfish and the Spider is great reading. [It has] not only stimulated my thinking, but as a result of the reading, I proposed ten action points for my own organization." —PROFESSOR K L A U S SCHWAB, executive chairman, World Economic Forum More advance praise for The Starfish and the Spider "From eBay to Google, Skype to craigs list, inspired individuals are catalyzing a marked shift from hierarchies to the wisdom of crowds. On and Rod provide sharp insights into how to avoid becoming the next victim of this market populism, or, if you arc so inclined, the strategies to take on those vulnerable incumbents." —Randy Komisar, author; Stanford professor; partner, Kleiner Perkins Caufield & Byers "Highly readable and highly entertaining. Beckstrom and Brafman make a strong case for the leaderless organization, an approach that is too often unappreciated in today's world."


pages: 742 words: 137,937

The Future of the Professions: How Technology Will Transform the Work of Human Experts by Richard Susskind, Daniel Susskind

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23andMe, 3D printing, additive manufacturing, AI winter, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, Andrew Keen, Atul Gawande, Automated Insights, autonomous vehicles, Big bang: deregulation of the City of London, big data - Walmart - Pop Tarts, Bill Joy: nanobots, business process, business process outsourcing, Cass Sunstein, Checklist Manifesto, Clapham omnibus, Clayton Christensen, clean water, cloud computing, computer age, computer vision, conceptual framework, corporate governance, crowdsourcing, Daniel Kahneman / Amos Tversky, death of newspapers, disintermediation, Douglas Hofstadter, en.wikipedia.org, Erik Brynjolfsson, Filter Bubble, Frank Levy and Richard Murnane: The New Division of Labor, full employment, future of work, Google Glasses, Google X / Alphabet X, Hacker Ethic, industrial robot, informal economy, information retrieval, interchangeable parts, Internet of things, Isaac Newton, James Hargreaves, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, knowledge economy, lump of labour, Marshall McLuhan, Narrative Science, natural language processing, Network effects, optical character recognition, personalized medicine, pre–internet, Ray Kurzweil, Richard Feynman, Richard Feynman, Second Machine Age, self-driving car, semantic web, Skype, social web, speech recognition, spinning jenny, strong AI, supply-chain management, telepresence, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, transaction costs, Turing test, Watson beat the top human players on Jeopardy!, young professional

In Chapter 2 we observed cases where experts and lay people collaborate with each other, with the former, for example, reviewing, editing, or supplementing the user-generated content. A third type of online collaboration is crowdsourcing. Here large numbers of people—experts or non-specialists—are invited to contribute to a well-defined project or problem that is so large that it requires many hands, or is so difficult that it might benefit from the ‘wisdom of crowds’,24 or so obscure that an answer is most likely to be found if the net of inquiry is spread widely enough. WikiHouse and Arcbazar in architecture, and Open Ideo and WikiStrat in consulting, have run crowdsourcing projects in this manner. Realization of latent demand One of the attractions of the new approaches to professional work and, in particular, of various online services, is that practical expertise is steadily becoming more affordable and accessible.

Glasgow Herald, 18 Nov.1985, p. 15. 17 <http://www.ey.com> (accessed 23 March 2015). 18 Atul Gawande, The Checklist Manifesto (2010), 34. 19 Gawande, The Checklist Manifesto, 36. 20 See Yochai Benkler, The Wealth of Networks—How Social Production Transforms Markets and Freedom (2006). 21 <http://www.tripadvisor.co.uk>. 22 See Eric Topol, The Patient Will See You Now (2015), on driverless cars and doctorless patients. 23 Penelope Eckert, ‘Communities of Practice’, in The Encyclopedia of Language and Linguistics, ed. Keith Brown (2006). 24 James Surowiecki, The Wisdom of Crowds (2004). 25 See e.g. David Maister, Managing the Professional Service Firm (1993). 26 See e.g. the Sarbanes–Oxley Act of 2002 in the USA (n. 15 above). 27 Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts. 28 With original emphasis, from Herbert L. A. Hart, ‘Bentham and the Demystification of the Law’, Modern Law Review, 36: 1 (1973), 2. 29 Harold J.

, MIT Press, 134: 3 (Summer 2005), 19–26. Summers, Larry, ‘What You (Really) Need to Know’, New York Times, 20 Jan. 2012 <http://www.nytimes.com> (accessed 27 March 2015). Summers, Larry, ‘Economic Possibilities for Our Children’, NBER Reporter, no. 4, 2014 <http://www.nber.org/reporter/2013number4/2013no4.pdf> (accessed 29 March 2015). Sunstein, Cass, Infotopia (New York: Oxford University Press, 2006). Surowiecki, James, The Wisdom of Crowds (London: Abacus, 2004). Surowiekcki, James, ‘A Billion Prices Now’, New Yorker, 30 May 2011. Susskind, Richard, Expert Systems in Law (Oxford: Clarendon Press, 1987; paperback edn., 1989). Susskind, Richard, ‘Why Lawyers Should Consider Consultancy’, Financial Times, 13 Oct. 1992. Susskind, Richard, The Future of Law (Oxford: Oxford University Press, 1996; paperback edn., 1998). Susskind, Richard, Transforming the Law (Oxford: Oxford University Press, 2000; paperback edn., 2003).

Common Knowledge?: An Ethnography of Wikipedia by Dariusz Jemielniak

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Andrew Keen, barriers to entry, citation needed, collaborative consumption, collaborative editing, conceptual framework, continuous integration, crowdsourcing, Debian, deskilling, digital Maoism, en.wikipedia.org, Filter Bubble, Google Glasses, Hacker Ethic, hive mind, Internet Archive, invisible hand, Jaron Lanier, jimmy wales, job satisfaction, Julian Assange, knowledge economy, knowledge worker, Menlo Park, moral hazard, online collectivism, pirate software, RFC: Request For Comment, Richard Stallman, Silicon Valley, Skype, slashdot, social software, Stewart Brand, The Nature of the Firm, The Wisdom of Crowds, transaction costs, WikiLeaks, wikimedia commons

He also does not see the liberation in the new modes of knowledge production and the demise of the traditional ones (Scott et al., 1994). Wikipedia encompasses the capitalist mode of production and is the avant-garde of the emerging informational-communal approach (Barbrook, 2000; Hardt & Negri, 2001; O’Neil, 2011a; Firer-Blaess & Fuchs, 2013). Also, Keen apparently ignores the contexts in which “the wisdom of crowds” is particularly effective (Surowiecki, 2004) and seems to believe the Taylorist divide—some think and give orders, and others physically work and are the passive recipients of morsels of knowledge graciously given by the order givers—is still effective (Blackler, 1995). Moreover, J. Lanier’s and Keen’s critique of Wikipedia assumes that the multiple authorship of Wikipedia articles dilutes authors’ intellect and individuality and reduces them to a sort of a smart mob, composed of anonymous, chaotic, and contingent passersby, heavily relying on free-riding (R.

The limits of organizational democracy. The Academy of Management Executive, 18(3), 81–95. Kiel: Difference between revisions. (n.d.). Wikipedia. Retrieved from http://en.wikipedia .org/w/index.php?title=Kiel&diff=2839601&oldid=2838532 Kim, S. (2002). Participative management and job satisfaction: Lessons for management leadership. Public Administration Review, 62(2), 231–241. Kittur, A., & Kraut, R. E. (2008). Harnessing the wisdom of crowds in Wikipedia: Quality through coordination. In CSCW ’08: Proceedings of the 2008 ACM Conference on Computer Supported Cooperative Work (pp. 37–46). New York: ACM. Kittur, A., Chi, E., Pendleton, B. A., Suh, B., & Mytkowicz, T. (2007, April 28–May 3). Power of the few vs. wisdom of the crowd: Wikipedia and the rise of the bourgeoisie. Paper presented at the Twenty-Fifth Annual ACM Conference on Human Factors in Computing Systems, San Jose, CA.

Paper presented at the IEEE International Conference on Privacy, Security, Risk, and Trust, and IEEE International Conference on Social Computing, Boston. Sun, Y., Fang, Y., & Lim, K. H. (2011). Understanding sustained participation in transactional virtual communities. Decision Support Systems, 53(1), 12–22. Sundin, O. (2011). Janitors of knowledge: Constructing knowledge in the everyday life of Wikipedia editors. Journal of Documentation, 67(5), 840–862. Surowiecki, J. (2004). The wisdom of crowds. New York: Anchor Books. Swartz, A. (2006, September 4). Who writes Wikipedia? Raw Thought blog. Retrieved from http://www.aaronsw.com/weblog/whowriteswikipedia Szymanski, L. A., Devlin, A. S., Chrisler, J. C., & Vyse, S. A. (1993). Gender role and attitudes toward rape in male and female college students. Sex Roles, 29(1), 37–57. Talk:Access to nonpublic information policy. (2013, November 7).


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

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3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, Malacca Straits, Mark Zuckerberg, market bubble, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

This is a classic case of Goodhart’s Law, which says that once a measure becomes a target, it ceases to be useful, partly because so many people have an incentive to doctor numbers to meet it.6 One useful and timely data source is the prices in global financial markets, which in normal times will accurately capture the world’s best collective guess about the likely prospects of an economy. What author James Surowiecki has called “the wisdom of crowds” has substance, and the market embodies it, second by second, subject to emotional contagions but not wild revisions.7 A sharp decline in the price of copper has almost always been an ominous sign for the global economy, earning the base metal the moniker “Dr. Copper” in financial circles. In the United States, one of few countries where most lending is done through bonds and other credit market products rather than through banks, the credit markets started sending distress signals well before the onset of the last three recessions, in 1990, 2001, and 2007.

EPWP1401, February 2014. 4 Ghada Fayad and Roberto Perrelli, “Growth Surprises and Synchronized Slowdowns in Emerging Markets: An Empirical Investigation,” International Monetary Fund, 2014. 5 Lant Pritchett and Lawrence Summers, “Asiaphoria Meets Regression to the Mean,” National Bureau of Economic Research, Working Paper no. 20573, October 2014. 6 “Goodhart’s Law,” BusinessDictionary.com. 7 James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations (New York: Doubleday, 2004). 8 Ned Davis, Ned’s Insights, November 14, 2014. 9 “Picking Apart the Productivity Paradox,” Goldman Sachs Research, October 5, 2015. Chapter 1: People Matter 1 Rick Gladstone, “India Will Be Most Populous Country Sooner Than Thought.” New York Times, July 29, 2015. 2 Charles S.

. ——. “Can India Still Be a Breakout Nation.” Economic Times, December 10, 2012. ——. “The Ever-Emerging Markets: Why Economic Forecasts Fail.” Foreign Affairs 93, no. 1 (2014). ——. “China’s Stock Plunge Is Scarier Than Greece.” Wall Street Journal, July 7, 2015. Studwell, Joe. How Asia Works: Success and Failure in the World’s Most Dynamic Region. New York: Grove, 2013. Surowiecki, James. The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations. New York: Doubleday, 2004. Tilton, Andrew. “Still Wading Through ‘Great Stagnations.’ ” Goldman Sachs Global Investment Research, September 17, 2014. ——. “Growth Recovery and Trade Stagnation Evidence from New Data.” Goldman Sachs Global Investment Research, June 5, 2015.


pages: 397 words: 110,130

Smarter Than You Think: How Technology Is Changing Our Minds for the Better by Clive Thompson

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3D printing, 4chan, A Declaration of the Independence of Cyberspace, augmented reality, barriers to entry, Benjamin Mako Hill, butterfly effect, citizen journalism, Claude Shannon: information theory, conceptual framework, corporate governance, crowdsourcing, Deng Xiaoping, discovery of penicillin, Douglas Engelbart, Edward Glaeser, en.wikipedia.org, experimental subject, Filter Bubble, Freestyle chess, Galaxy Zoo, Google Earth, Google Glasses, Henri Poincaré, hindsight bias, hive mind, Howard Rheingold, information retrieval, iterative process, jimmy wales, Kevin Kelly, Khan Academy, knowledge worker, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Netflix Prize, Nicholas Carr, patent troll, pattern recognition, pre–internet, Richard Feynman, Richard Feynman, Ronald Coase, Ronald Reagan, sentiment analysis, Silicon Valley, Skype, Snapchat, Socratic dialogue, spaced repetition, telepresence, telepresence robot, The Nature of the Firm, the scientific method, The Wisdom of Crowds, theory of mind, transaction costs, Vannevar Bush, Watson beat the top human players on Jeopardy!, WikiLeaks, X Prize, éminence grise

She’s not sure precisely how many fans were involved overall—hundreds, she guesses—but the group was diverse enough that it tapped into a broad range of skills. “There were some very tech-savvy people on the chat, so when we started asking for something really hard they could say, ‘Okay, that’s technologically feasible and that’s not.’” This breadth of participation is key to what author James Surowiecki dubbed “the wisdom of crowds.” Crowd wisdom as a scientific phenomenon was first explored in 1906 when the British scientist Francis Galton visited a county fair and observed a contest to guess the weight of an ox. About eight hundred fair attendees put in guesses. Galton expected that compared to the guess of an expert judge of oxen, the crowd of attendees would be far off the mark. But when Galton averaged out the crowd’s guesses, the result was 1,197 pounds—just one pound less than the actual weight.

the publication of Fifty Shades of Grey: Julie Bosman, “Discreetly Digital, Erotic Novel Sets American Women Abuzz,” The New York Times, March 9, 2012, accessed March 23, 2013, www.nytimes.com/2012/03/10/business/media/an-erotic-novel-50-shades-of-grey-goes-viral-with-women.html?pagewanted=all&_r=0. “If you wanted to read a 3000 word fic”: Maciej Cegłowski, “The Fans Are All Right,” Pinboard Blog, accessed March 24, 2013, blog.pinboard.in/2011/10/the_fans_are_all_right/. “These people,” he wrote later, “do not waste time”: Ibid. “the crowd’s judgment was essentially perfect”: James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations (New York: Doubleday, 2004), xiii. the spectacular collapse of the Los Angeles Times’s “wikitorial”: Dan Glaister, “LA Times ‘wikitorial’ gives editors red faces,” The Guardian, June 21, 2005, accessed March 25, 2013, www.guardian.co.uk/technology/2005/jun/22/media.pressandpublishing.

social scientists tested different techniques of brainstorming: Frans Johansson, The Medici Effect: What Elephants and Epidemics Can Teach Us about Innovation (Boston: Harvard Business School Press, 2006), 108–10; and Susan Cain, Quiet: The Power of Introverts in a World That Can’t Stop Talking (New York: Crown, 2012), Kindle edition. My writing here also draws on a column I previously wrote on this subject: “Clive Thompson on the Power of Introversion,” Wired, April 2012, accessed March 24, 2013, www.wired.com/magazine/2012/03/st_thompson_introvert/. A 2011 study took several virtual groups: Jan Lorenza, Heiko Rauhut, Frank Schweitzera, and Dirk Helbing, “How Social Influence Can Undermine the Wisdom of Crowd Effect,” PNAS 108, no. 22 (May 31, 2011): 9020–25, accessed March 24, 2013, www.pnas.org/content/108/22/9020.full.pdf#page=1&view=FitH. The “rich get richer” problem has been investigated extensively by the network scientist Duncan J. Watts; he writes about his research in “Is Justin Timberlake a Product of Cumulative Advantage?” The New York Times Magazine, April 15, 2007, accessed March 24, 2013, www.nytimes.com/2007/04/15/magazine/15wwlnidealab.t.html, and Everything Is Obvious*: *Once You Know the Answer (New York: Crown Business, 2011): 54–81.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, invisible hand, Jean Tirole, joint-stock company, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, payday loans, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, War on Poverty, Washington Consensus, We are the 99%, working poor

Every activity must derive its justification from a conscious social purpose.”153 Instead, I believe he initiated an important neoliberal practice as advocating a double-truth doctrine: one for the masses, where nominally everything goes and spontaneous innovation reigns; and a different one for his small, tight-knit cadre of believers. First and foremost, neoliberalism masquerades as a radically populist philosophy, one that begins with a set of philosophical theses about knowledge and its relationship to society. It seems at first to be a radical leveling philosophy, denigrating expertise and elite pretentions to hard-won knowledge, instead praising the “wisdom of crowds.” The Malcolm Gladwells, Jimmy Waleses, and James Surowieckis of the world are its pied pipers. This movement appeals to the vanity of every self-absorbed narcissist, who would be glad to ridicule intellectuals as “professional secondhand dealers in ideas.”154 But of course it sports a predisposition to disparage intellectuals, since “knowledge and ignorance are relative concepts.” In Hayekian language, it elevates a “kosmos”—a supposedly spontaneous order that no one has intentionally designed or structured because they are ignorant—over a “taxis.”

The allure of the neoliberal theater of cruelty derives from the essential distancing of the audience from the spectacle: becoming complicit with the cruelty merely by being willing spectators, deriving pleasure from the wretchedness of the scapegoat; throughout the experience, the actual onus for the pain is inevitably diverted onto faceless collectives—this is the simulacrum of capitulation to the wisdom of the market. Furthermore, the audience is guaranteed to shed any residual guilt they might feel in their enjoyment at the distress of the unsuccessful and the destitute through reification of the invisible fourth wall; the lesson reiterated is that it is fine for the audience to bear witness to distress, because the mark entered the arena “voluntarily,” and the verdict was delivered through the “wisdom of crowds,” and in the last instance, there is money to be made and gratification to be experienced at the expense of the loser. Their shame in abject failure becomes a fungible commodity, albeit one of the least rare commodities on the planet. Defeat is not stoic nobility planted on this stage; it is instead the human compost of conspicuous destitution, the fertilizer of economic growth. Losers must learn to let their defeat be turned by others into something that will, at minimum, make money for third parties.

Predictions by the Council of Economic Advisors, Federal Reserve Board, and Congressional Budget Office were often worse than random. • Economists have proven repeatedly that they cannot predict the turning points in the economy. • No specific economic forecasters consistently lead the pack in accuracy. • No economic forecaster has consistently higher forecasting skills predicting any particular economic statistic. • Consensus forecasts do not improve accuracy (although the press loves them. So much for the wisdom of crowds) . • Finally, there’s no evidence that economic forecasting has improved in recent decades18 Again, if this track record was widely known already to have been so very poor, then missing the onset of the crisis should not have caused such consternation on its own. Or conversely, the profession could set about writing down little models that could “retrospectively” have predicted the crisis, doing whatever worked in the past.


pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

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Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, Kenneth Rogoff, labour mobility, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money: store of value / unit of account / medium of exchange, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, open economy, paradox of thrift, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus

If the market concurred with the Fed’s judgment on deflation, then there should be no run on gold—in fact, the Fed might have to be a buyer of gold to maintain the price. Conversely, if the market questioned the Fed’s judgment, then a rush to redeem paper for gold might result, which would be a powerful signal to the Fed that it needed to return to the original money-gold ratio. Based on what behavioral economists and sociologists have observed about the “wisdom of crowds” as reflected in market prices, this would seem to be a more reliable guide than relying on the narrow judgment of a few lawyers and economists gathered in the Fed’s high-ceilinged boardroom. A variation of this approach would be to allow the Fed to exceed the gold coverage ratio ceiling upon the announcement of a bona fide financial emergency by a joint declaration from the president of the United States and the speaker of the House.

New York: Basic Books, 2011. Steil, Benn, and Manuel Hinds. Money, Markets and Sovereignty. New Haven: Yale University Press, 2009. Steil, Benn, and Robert E. Litan. Financial Statecraft: The Role of Financial Markets in American Policy. New Haven: Yale University Press, 2006. Stewart, Bruce H., and J. M. Thompson. Nonlinear Dynamics and Chaos, 2nd ed. Chichester, UK: Wiley, 2002. Surowiecki, James. The Wisdom of Crowds. New York: Doubleday, 2004. Tainter, Joseph A. The Collapse of Complex Societies. Cambridge: Cambridge University Press, 1988. Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007. Tarnoff, Ben. Moneymakers: The Wicked Lives and Surprising Adventures of Three Notorious Counterfeiters. New York: Penguin Press, 2011. Taylor, John B. Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis.


pages: 317 words: 100,414

Superforecasting: The Art and Science of Prediction by Philip Tetlock, Dan Gardner

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Affordable Care Act / Obamacare, Any sufficiently advanced technology is indistinguishable from magic, availability heuristic, Black Swan, butterfly effect, cloud computing, cuban missile crisis, Daniel Kahneman / Amos Tversky, desegregation, Edward Lorenz: Chaos theory, forward guidance, Freestyle chess, fundamental attribution error, germ theory of disease, hindsight bias, index fund, Jane Jacobs, Jeff Bezos, Mikhail Gorbachev, Mohammed Bouazizi, Nash equilibrium, Nate Silver, obamacare, pattern recognition, performance metric, place-making, placebo effect, prediction markets, quantitative easing, random walk, randomized controlled trial, Richard Feynman, Richard Feynman, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, Silicon Valley, Skype, statistical model, stem cell, Steve Ballmer, Steve Jobs, Steven Pinker, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Watson beat the top human players on Jeopardy!

Dragonfly Eye In 1906 the legendary British scientist Sir Francis Galton went to a country fair and watched as hundreds of people individually guessed the weight that a live ox would be after it was “slaughtered and dressed.” Their average guess—their collective judgment—was 1,197 pounds, one pound short of the correct answer, 1,198 pounds. It was the earliest demonstration of a phenomenon popularized by—and now named for—James Surowiecki’s bestseller The Wisdom of Crowds. Aggregating the judgment of many consistently beats the accuracy of the average member of the group, and is often as startlingly accurate as Galton’s weight-guessers. The collective judgment isn’t always more accurate than any individual guess, however. In fact, in any group there are likely to be individuals who beat the group. But those bull’s-eye guesses typically say more about the power of luck—chimps who throw a lot of darts will get occasional bull’s-eyes—than about the skill of the guesser.

Laura Kray, Linda George, Katie Liljenquist, Adam Galinsky, Neal Roese, and Philip Tetlock, “From What Might Have Been to What Must Have Been: Counterfactual Thinking Creates Meaning,” Journal of Personality and Social Psychology 98, no. 1 (2010): 106–18. 30. Robert Shiller, interview with the author, August 13, 2013. 7. Supernewsjunkies? 1. David Budescu and Eva Chen have invented a contribution-weighted method of scoring forecasters that gives special weight to those who see things before others do; see D. V. Budescu and E. Chen, “Identifying Expertise to Extract the Wisdom of Crowds,” Management Science 61, no. 2 (2015): 267–80. 2. Doug Lorch, in discussion with the author, September 30, 2014. The Arctic sea ice question, like the Arafat-polonium question (and others), pushed the ideological hot buttons of many forecasters. They saw bigger questions behind the smaller ones. And the bigger ones were incendiary: Is global warming real? Did Israel kill Arafat? They then did the old bait-and-switch routine.


pages: 313 words: 95,077

Here Comes Everybody: The Power of Organizing Without Organizations by Clay Shirky

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Andrew Keen, Berlin Wall, bioinformatics, Brewster Kahle, c2.com, crowdsourcing, en.wikipedia.org, hiring and firing, hive mind, Howard Rheingold, Internet Archive, invention of agriculture, invention of movable type, invention of the printing press, invention of the telegraph, jimmy wales, Kuiper Belt, lump of labour, Mahatma Gandhi, means of production, Merlin Mann, Nash equilibrium, Network effects, Nicholas Carr, Picturephone, place-making, Pluto: dwarf planet, prediction markets, price mechanism, prisoner's dilemma, profit motive, Richard Stallman, Ronald Coase, Silicon Valley, slashdot, social software, Stewart Brand, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, transaction costs, ultimatum game, Yogi Berra

Small groups are thus better conversational environments than large ones and find it easier to engage in convergent thinking, where everyone comes to agree on a single point of view. This is one of the things social tools don’t change about group life—small groups are more effective at creating and sustaining both agreement and shared awareness. The core characteristics of large groups are the inverse. People have to be less tightly connected, on average, to one another. As a result, such groups are better able to produce what James Surowiecki has called “the wisdom of crowds.” In his book of that name he identified the ways distributed groups whose members aren’t connected can often generate better answers, by pooling their knowledge or intuition without having to come to an agreement. We have many ways of achieving this kind of aggregation, from market pricing mechanisms to voting to the prediction markets Surowiecki champions, but these methods all have two common characteristics: they work better in large groups, and they don’t require direct communication as the norm among members.

Yang Huanming’s lament about the obstacles to their work can be found in translation at the YaleGlobal journal, in “Chinese Scientists Say SARS Efforts Stymied by Organizational Obstacles” (yaleglobal.yale.edu/display.article?id=1745. ). Martin Enserink has a broader review of the Chinese performance in “SARS in China: China’s Missed Chance” Science 301 (5631), July 18, 2003, and at www.sciencemag.org/cgi/content/full/301/5631/294). CHAPTER 11: PROMISE, TOOL, BARGAIN Page 267: The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, James Surowiecki (Doubleday, 2004) Page 276: equality matching The idea of equality matching (and the other listed forms of social participation) come from Alan Page Fiske’s Structures of Social Life: The Four Elementary Forms of Human Relations: Communal Sharing, Authority Ranking, Equality Matching, Market Pricing, Free Press (1991).

Future Files: A Brief History of the Next 50 Years by Richard Watson

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Albert Einstein, bank run, banking crisis, battle of ideas, Black Swan, call centre, carbon footprint, cashless society, citizen journalism, computer age, computer vision, congestion charging, corporate governance, corporate social responsibility, deglobalization, digital Maoism, disintermediation, epigenetics, failed state, financial innovation, Firefox, food miles, future of work, global supply chain, global village, hive mind, industrial robot, invention of the telegraph, Jaron Lanier, Jeff Bezos, knowledge economy, linked data, low skilled workers, M-Pesa, Northern Rock, peak oil, pensions crisis, precision agriculture, prediction markets, Ralph Nader, Ray Kurzweil, rent control, RFID, Richard Florida, self-driving car, speech recognition, telepresence, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Turing test, Victor Gruen, white flight, women in the workforce, Zipcar

GPS, RFID and “smart dust” will mean that inert physical objects (and people) will know where they are and will be able to communicate with each other. The bad news, perhaps, is that technologically speaking, privacy is dead or dying. The good news is that all this connectivity is increasing transparency and hence our behavior may actually become more honest. We may even get smarter at making decisions, because our connectivity will allow instant polling and the wisdom of crowds is nearly always greater than the intelligence of any single member. We will thus see a subtle shift from “me” to “we”. GRIN technologies Machines will be a dominant feature of the future. Computers will eventually become more intelligent than people, at which point humanity will be faced with something of a dilemma. If machines are more intelligent than their makers, what’s to stop them taking over?

But while Kurzweil sees computers doubling in speed and power and programmers working feverishly to this end, Kapor believes that human beings differ so totally from machines that the test will never be passed, not least because we are housed in bodies that feel pleasure and pain and accumulate experience and knowledge, much of which is tacit rather than expressed. Other experts such as neurophysiologist Bill Calvin suggest that the human brain is so “buggy” that computers will never be able to emulate it. Ultimately, though, this might not be the point; as some have suggested — such as James Surowiecki in his book The Wisdom of Crowds — the internet is already fostering an unanticipated form of AI, a highly efficient marketplace for ideas and information known as collective intelligence or the “hive mind”. In other words, if we connected up all the computers on the planet and asked the resultant network or grid a question like “Is there a God?” the answer may very well be “There is now”. 46 FUTURE FILES Nothing but the truth In the same way in which Adam Smith suggested that buyers and sellers, each pursuing their own interests, would together produce more goods more efficiently than under any other arrangement, so too online suppliers of collective intelligence, like bloggers, can create more knowledge with less bias and over a wider span of disciplines than any group of experts could.


pages: 123 words: 32,382

Grouped: How Small Groups of Friends Are the Key to Influence on the Social Web by Paul Adams

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Airbnb, Cass Sunstein, cognitive dissonance, David Brooks, information retrieval, invention of the telegraph, planetary scale, race to the bottom, Richard Thaler, sentiment analysis, social web, statistical model, The Wisdom of Crowds, web application, white flight

This example is from Dan Ariely’s book Predictably Irrational: The Hidden Forces That Shape Our Decisions (Harper Perennial, 2008). 11. See the Wikipedia article on Social Norms for more information. 12. See the 2010 poster presentation “N170 responses to faces predict implicit ingroup favoritism” by Kyle Ratner and David Amodio. 13. See the work of Herbert Simon and the Wikipedia article on Bounded Rationality. 14. See James Surowiecki’s book The Wisdom of Crowds (Anchor, 2005). 15. See the 2010 research paper “Optimally interacting minds” by Bahrami and others. 16. Data from the NCCN private community of cancer patients as described in Groundswell, a book by Charlene Li and Josh Bernoff (Harvard Business Press, 2008). 17. See Philip Tetlock’s book Expert Political Judgment: How Good Is It? How Can We Know? (Princeton University Press, 2006). 18.


pages: 797 words: 227,399

Robotics Revolution and Conflict in the 21st Century by P. W. Singer

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agricultural Revolution, Albert Einstein, Any sufficiently advanced technology is indistinguishable from magic, Atahualpa, barriers to entry, Berlin Wall, Bill Joy: nanobots, blue-collar work, borderless world, clean water, Craig Reynolds: boids flock, cuban missile crisis, en.wikipedia.org, Ernest Rutherford, failed state, Fall of the Berlin Wall, Firefox, Francisco Pizarro, Frank Gehry, friendly fire, game design, George Gilder, Google Earth, Grace Hopper, I think there is a world market for maybe five computers, if you build it, they will come, illegal immigration, industrial robot, interchangeable parts, invention of gunpowder, invention of movable type, invention of the steam engine, Isaac Newton, Jacques de Vaucanson, job automation, Johann Wolfgang von Goethe, Law of Accelerating Returns, Mars Rover, Menlo Park, New Urbanism, pattern recognition, private military company, RAND corporation, Ray Kurzweil, RFID, robot derives from the Czech word robota Czech, meaning slave, Rodney Brooks, Ronald Reagan, Schrödinger's Cat, Silicon Valley, speech recognition, Stephen Hawking, strong AI, technological singularity, The Coming Technological Singularity, The Wisdom of Crowds, Turing test, Vernor Vinge, Wall-E, Yogi Berra

., 64. 231 “Obviously the birds lack” Thomas K. Adams, “The Real Military Revolution,” Parameters 30, no. 3 (2000). 231 “boids,” artificial birds Craig W. Reynolds, “An Evolved, Vision-Based Model of Obstacle Avoidance Behavior,” in Proceedings, ed. C. Langton (Redwood City, CA: Addison-Wesley, 1994). 231 follow three simple rules Adams, “The Real Military Revolution.” 232 “the wisdom of crowds” James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations, 1st ed. (New York: Doubleday, 2004). 232 “We don’t want to copy” Tobey Grumet, “Robots Clean House,” Popular Mechanics 180, no. 11 (2003): 30. 232 “an unassailable wireless ‘Internet in the sky’” Lakshmi Sandhana, “The Drone Armies Are Coming,” Wired News, August 30, 2002, http://www.wired.com/science/discoveries/news/2002/08/54728. 232 “They should just go ahead” Scientist, interview, Peter W.

This basic boid system worked so well that it was also used in the movie Batman Returns, to create the realistic-looking bat sequences. From simple rules then emerge complex behaviors. There are many other examples of how complex, self-organizing systems work outside of nature. One is how big cities like New York never run out of food, despite the fact that no one is in charge of creating a master plan for moving food into and around the city. Another is the odd phenomenon known as “the wisdom of crowds,” where a mass of relatively uninformed people tend to make smarter decisions in the aggregate than better-informed individuals do on their own. This explains how the index of the stock market beats almost every professional stock picker. Roboticists are now using these same approaches to get relatively unsophisticated robots to carry out very sophisticated tasks. James McLurkin, Swarm Project manager at iRobot, describes how bees and ants helped inspire his team.


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The Signal and the Noise: Why So Many Predictions Fail-But Some Don't by Nate Silver

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airport security, availability heuristic, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Swan, Broken windows theory, Carmen Reinhart, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Freestyle chess, fudge factor, George Akerlof, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, new economy, Norbert Wiener, PageRank, pattern recognition, pets.com, prediction markets, Productivity paradox, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, wikimedia commons

Smith’s “invisible hand” might be thought of as a Bayesian process, in which prices are gradually updated in response to changes in supply and demand, eventually reaching some equilibrium. Or, Bayesian reasoning might be thought of as an “invisible hand” wherein we gradually update and improve our beliefs as we debate our ideas, sometimes placing bets on them when we can’t agree. Both are consensus-seeking processes that take advantage of the wisdom of crowds. It might follow, then, that markets are an especially good way to make predictions. That’s really what the stock market is: a series of predictions about the future earnings and dividends of a company.8 My view is that this notion is mostly right most of the time. I advocate the use of betting markets for forecasting economic variables like GDP, for instance. One might expect these markets to improve predictions for the simple reason that they force us to put our money where our mouth is, and create an incentive for our forecasts to be accurate.

Unless I had some unique information that they weren’t privy to, or I were truly convinced that I had spent much more time analyzing the problem than they had, the odds are that my iconoclastic view is just going to lose money. The heuristic of “follow the crowd, especially when you don’t know any better” usually works pretty well. And yet, there are those times when we become too trusting of our neighbors—like in the 1980s “Just Say No” commercials, we do something because Everyone Else Is Doing it Too. Instead of our mistakes canceling one another out, which is the idea behind the wisdom of crowds,74 they instead begin to reinforce one another and spiral out of control. The blind lead the blind and everyone falls off a cliff. This phenomenon occurs fairly rarely, but it can be quite disastrous when it does. Sometimes we may also infer that the most confident-acting neighbor must be the best forecaster and follow his lead—whether he knows what he’s doing. In 2008, for reasons that are still somewhat unclear, a rogue trader on Intrade started buying huge volumes of John McCain stock in the middle of the night when there was absolutely no news, while dumping huge volumes of Barack Obama stock.75 Eventually the anomalies were corrected, but it took some time—often four to six hours—before prices fully rebounded to their previous values.

For 1980, they are taken from data on the market capitalization within the New York Stock Exchange (“Annual reported volume, turnover rate, reported trades [mils. of shares],” http://www.nyxdata.com/nysedata/asp/factbook/viewer_edition.asp?mode=table&key=2206&category=4) and multiplied by the ratio of all U.S. stock holdings to NYSE market capitalization as of 1988, per World Bank data. All figures are adjusted to 2007 dollars. 74. James Surowiecki, The Wisdom of Crowds (New York: Random House, 2004). 75. Silver, “Intrade Betting Is Suspicious.” 76. Marko Kolanovic, Davide Silvestrini, Tony SK Lee, and Michiro Naito, “Rise of Cross-Asset Correlations,” Global Equity Derivatives and Delta One Strategy, J.P. Morgan, May 16, 2011. http://www.cboe.com/Institutional/JPMCrossAssetCorrelations.pdf. 77. Richard H. Thaler, “Anomalies: The Winner’s Curse,” Journal of Economic Perspectives, 2, no. 1 (1998), pp. 191–202. http://econ.ucdenver.edu/Beckman/Econ%204001/thaler-winner’s%20curse.pdf. 78.


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The Empathic Civilization: The Race to Global Consciousness in a World in Crisis by Jeremy Rifkin

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agricultural Revolution, Albert Einstein, back-to-the-land, British Empire, carbon footprint, collaborative economy, death of newspapers, delayed gratification, distributed generation, en.wikipedia.org, energy security, feminist movement, global village, hydrogen economy, illegal immigration, income inequality, income per capita, interchangeable parts, Internet Archive, invention of movable type, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, labour mobility, Mahatma Gandhi, Marshall McLuhan, means of production, megacity, meta analysis, meta-analysis, Milgram experiment, new economy, New Urbanism, Norbert Wiener, out of africa, Peace of Westphalia, peak oil, planetary scale, Simon Kuznets, Skype, smart grid, smart meter, supply-chain management, surplus humans, the medium is the message, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, transaction costs, upwardly mobile, uranium enrichment, working poor, World Values Survey

A “wiki workplace” refers to a collaborative venture involving scores, hundreds, and even thousands of people—some experts and others amateurs—usually across many different fields, who come together to share their ideas and problem-solve. These new fl at collaborative learning environments mobilize the collective wisdom of crowds, and their track record is impressive when compared to traditional hierarchically organized corporate learning environments. The phenomenon known as the “wisdom of crowds” is not something that just emerged with the advent of distributed computing technology. Francis Galton, a scientist best known for his championing of human eugenics—he was also Charles Darwin’s half cousin—was the first to grasp the importance of collaborative wisdom. In 1906, Galton was visiting a country fair in his home town of Plymouth, England. He happened on a weight-judging competition.

The Guardian. July 9, 2008. www.guardian.co.uk 9 Bohannon, J. “Distributed Computing: Grassroots Supercomputing.” Science. Vol. 308. No. 5723. May 6, 2005. pp. 810-813. 10 Ibid. 11 “List of Distributed Computing Projects.” Wikipedia. http://en.wikipedia.org/wiki/List_of_distributed_computing_projects 12 Bohannon. “Distributed Computing: Grassroots Supercomputing.” 13 Surowiecki, James. The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations. New York: Doubleday, 2004. p. xiii. 14 Tapscott, Don, and Anthony D. Williams. Wikinomics: How Mass Collaboration Changes Everything. New York: Penguin, 2006. p. 8. 15 Ibid. p. 9. 16 Ibid. 17 Ibid. p. 13. 18 McGirt, Ellen. “How Cisco’s CEO John Chambers Is Turning the Tech Giant Socialist.”

The Present Moment in Psychotherapy and Everyday Life. New York: Norton, 2004. Stiker, Henri-Jacques. A History of Disability. Trans. William Sayers. Ann Arbor, MI: University of Michigan Press, 1999. Stone, Lawrence. The Family, Sex and Marriage in England 1500-1800. New York: Harper Torchbooks, 1977. Strang, Heather. Repair or Revenge: Victims and Restorative Justice. Oxford: Clarendon Press, 2002. Surowiecki, James. The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations. New York: Doubleday, 2004. Suttie, Ian D. The Origins of Love and Hate. New York: Julian Press, 1952. Svenson, Ola, and A. J. Maule, eds. Time Pressure and Stress in Human Judgment and Decision Making. New York: Plenum Press, 1993. Tainter, Joseph A. The Collapse of Complex Societies.


pages: 538 words: 141,822

The Net Delusion: The Dark Side of Internet Freedom by Evgeny Morozov

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A Declaration of the Independence of Cyberspace, Ayatollah Khomeini, Berlin Wall, borderless world, Buckminster Fuller, Cass Sunstein, citizen journalism, cloud computing, cognitive dissonance, Columbine, computer age, conceptual framework, crowdsourcing, Dissolution of the Soviet Union, don't be evil, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global village, Google Earth, illegal immigration, invention of radio, invention of the printing press, invisible hand, John von Neumann, Marshall McLuhan, Naomi Klein, Network effects, new economy, New Urbanism, pirate software, pre–internet, Productivity paradox, RAND corporation, Ronald Reagan, Ronald Reagan: Tear down this wall, Silicon Valley, Silicon Valley startup, Sinatra Doctrine, Skype, Slavoj Žižek, social graph, Steve Jobs, technoutopianism, The Wisdom of Crowds, urban planning, Washington Consensus, WikiLeaks, women in the workforce

Is there a danger that the popularity of Facebook might nudge activists toward embracing some kind of “group fetishism,” in which they opt for a group solution to problems that could be solved much faster and better by solo artists? Now that almost every problem could be tackled by collective action rather than individually, is there a risk that a collective urge might also delay the solution? Before the Silicon Valley crowd went gung-ho about the wisdom of crowds, social psychologists and management experts were already studying conditions under which individuals who work as groups may be less effective than the same individuals working solo. One of the first people to discover and theorize this discrepancy was the French agricultural engineer Max Ringelmann. In 1882 Ringelmann conducted an experiment in which he asked four individuals to pull on a rope, first alone and then in groups, and then compared the results.

Increasing the number of participants diminishes the relative social pressure on each and often results in inferior outputs. Hearing of Ringelmann’s experiments today, one can’t help noticing the parallels to much of today’s Facebook activism. With the power of Facebook and Twitter at their fingertips, many activists may choose to tackle a problem collectively when tackling it individually would make more strategic sense. But just as “the madness of crowds” gives rise to “the wisdom of crowds” only under certain, carefully delineated social conditions, “social loafing” leads to synergy only once certain conditions are met (it’s possible to monitor and evaluate individual contributions, and the group members are aware that such evaluation is going on; tasks to be performed are unique and difficult, etc.) When such conditions are missing, pursuing a political end collectively rather than individually is no more desirable than choosing what to have for breakfast by polling one’s neighbors.


pages: 629 words: 142,393

The Future of the Internet: And How to Stop It by Jonathan Zittrain

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A Declaration of the Independence of Cyberspace, Amazon Mechanical Turk, Andy Kessler, barriers to entry, book scanning, Brewster Kahle, Burning Man, c2.com, call centre, Cass Sunstein, citizen journalism, Clayton Christensen, clean water, corporate governance, Daniel Kahneman / Amos Tversky, distributed generation, en.wikipedia.org, Firefox, game design, Hacker Ethic, Howard Rheingold, Hush-A-Phone, illegal immigration, index card, informal economy, Internet Archive, jimmy wales, license plate recognition, loose coupling, mail merge, national security letter, packet switching, Post-materialism, post-materialism, pre–internet, price discrimination, profit maximization, Ralph Nader, RFC: Request For Comment, RFID, Richard Stallman, Richard Thaler, risk tolerance, Robert X Cringely, SETI@home, Silicon Valley, Skype, slashdot, software patent, Steve Ballmer, Steve Jobs, Ted Nelson, Telecommunications Act of 1996, The Nature of the Firm, The Wisdom of Crowds, web application, wikimedia commons

Michael Snow, Article Creation Restricted to Logged-in Editors (Dec. 5, 2005), http://en.wikipedia.org/wiki/Wikipedia:Wikipedia_Signpost/2005-12-05/Page_creationrestrictions. 51. See supra note 19. 52. Wikipedia, Congressional Staffer Edits to Wikipedia, http://en.wikipedia.org/wiki/Con gressional_staffer_edits_to_Wikipedia (as of June 1, 2007, 09:00 GMT). 53. Time on Wikipedia Was Wasted, LOWELL SUN, Jan. 28, 2006. 54. See generally JAMES SUROWIECKI, THE WISDOM OF CROWDS (2004). 55. Centiare, Directory: MyWikiBiz, http://www.centiare.eom/Directory:MyWikiBiz (as of June 1, 2007, 09:05 GMT). 56. Id. 57. Wikipedia, User Talk:MyWikiBiz, http://en.wikipedia.Org/wild/User_talk:MyWikiBiz/Archive_1 (as of June 1, 2007, 09:05 GMT). 58. E-mail from Jimmy Wales, founder, Wikipedia, to WikiEN-1 mailing list, about My WikiBiz (Aug. 9, 2006, 02:58 PM), http://www.nabble.com/MyWikiBiz-tf2080660.html 59.

See John Borland, See Who’s Editing Wikipedia, Wired.com, Aug. 15, 2007, http://www.wired.com/politics/onlinerights/news/2007/08/wiki_tracker (explaining the mechanics of Wikiscanner); Posting of Kevin Poulsen to meat level, Vote on the Most Shameful Wikipedia Spin Jobs, Wired.com, http://blog.wired.com/27bstroke6/wikiwatch/ (Aug. 13, 2007, 23:03 GMT) (curating a user-contributed library of particularly notable instances of organizational censorship on Wikipedia). 4. See generally James Surowiecki, THE WISDOM OF CROWDS (2004). For a discussion of communitarian views of democratic citizenship and participatory meaning-making, see, for example, Michael Walzer, Response, in PLURALISM, JUSTICE, AND EQUALITY 282 (David Miller & Michael Walzer eds., 1993). 5. Communitarians have championed citizens’ role in shaping their communities. See, e.g., MICHAEL WALZER, THICK AND THIN: MORAL ARGUMENT AT HOME AND ABROAD (rev. ed. 2006); Michael J.


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

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AI winter, algorithmic trading, asset allocation, banking crisis, barriers to entry, Big bang: deregulation of the City of London, butterfly effect, buttonwood tree, buy low sell high, capital asset pricing model, citizen journalism, collateralized debt obligation, corporate governance, Craig Reynolds: boids flock, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, Emanuel Derman, en.wikipedia.org, experimental economics, financial innovation, Gordon Gekko, implied volatility, index arbitrage, index fund, information retrieval, Internet Archive, John Nash: game theory, Khan Academy, load shedding, Long Term Capital Management, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, moral hazard, mutually assured destruction, natural language processing, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Renaissance Technologies, Richard Stallman, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, semantic web, Sharpe ratio, short selling, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, too big to fail, transaction costs, Turing machine, Upton Sinclair, value at risk, Vernor Vinge, yield curve, Yogi Berra

When every other customer complains about meeting a man with a stomach pump, you’re better off packing your own lunch. Markets themselves are a form of collective intelligence (CI), and since transactions occur, they clearly arrive at prices seen as fair by buyers and sellers alike for everything from stocks to Pez dispensers (the first eBay merchandise). A recent book by James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations (Random House, 2004) has nearly 300 pages of examples of group wisdom. One such example is the television quiz show Who Wants to Be a Millionaire. Contestants are asked a series of increasingly difficult 227 228 Nerds on Wall Str eet questions, worth increasingly large payoffs if answered correctly.

The funniest line in that skit, a long disconnected utterance that failed to parse as English, was taken verbatim from the actual interview. 3. Treynor is widely regarded as having been a shoo-in to have shared the 1990 Nobel Prize in economics had he only published a paper that was sitting in his desk drawer. 4. Still in print after 150 years (New York: Three Rivers Press, 1995). 5. James Surowiecki, The Wisdom of Crowds:Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations (New York: Random House, 2004), xix. 6. Used in other chapters, this is a fabulous site founded to allow the historians of the Internet era to have something to use. The Internet Archive is at www.archive.org, and also has an extensive collection of nearly 400,000 free music downloads.


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The Ascent of Money: A Financial History of the World by Niall Ferguson

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Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, Corn Laws, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, interest rate swap, Isaac Newton, iterative process, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour mobility, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Naomi Klein, Nick Leeson, Northern Rock, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, value at risk, Washington Consensus, Yom Kippur War

The correct answer is 5 pence, since only with a bat worth £1.05 and a ball worth 5 pence are both conditions satisfied.12 If any field has the potential to revolutionize our understanding of the way financial markets work, it must surely be the burgeoning discipline of behavioural finance.13 It is far from clear how much of the body of work derived from the efficient markets hypothesis can survive this challenge.14 Those who put their faith in the ‘wisdom of crowds’15 mean no more than that a large group of people is more likely to make a correct assessment than a small group of supposed experts. But that is not saying much. The old joke that ‘Macroeconomists have successfully predicted nine of the last five recessions’ is not so much a joke as a dispiriting truth about the difficulty of economic forecasting.16 Meanwhile, serious students of human psychology will expect as much madness as wisdom from large groups of people.17 A case in point must be the near-universal delusion among investors in the first half of 2007 that a major liquidity crisis could not occur (see Introduction).

Mauboussin, More Than You Know: Finding Financial Wisdom in Unconventional Places (New York / Chichester, 2006). 12 Mark Buchanan, The Social Atom: Why the Rich Get Richer, Cheaters Get Caught, and Your Neighbor Usually Looks Like You (New York, 2007), p. 54. 13 For an introduction, see Andrei Shleifer, Inefficient Markets: An Introduction to Behavioral Finance (Oxford, 2000). For some practical applications see Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (New Haven, 2008). 14 See Peter Bernstein, Capital Ideas Evolving (New York, 2007). 15 See for example James Surowiecki, The Wisdom of Crowds (New York, 2005); Ian Ayres, Supercrunchers: How Anything Can Be Predicted (London, 2007). 16 Daniel Gross, ‘The Forecast for Forecasters is Dismal’, New York Times, 4 March 2007. 17 The classic work, first published in 1841, is Charles MacKay, Extraordinary Popular Delusions and the Madness of Crowds (New York, 2003 [1841]). 18 Yudkowsky, ‘Cognitive Biases’, pp. 110f. 19 For an introduction to Lo’s work, see Bernstein, Capital Ideas Evolving , ch. 4.


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The Geeks Shall Inherit the Earth: Popularity, Quirk Theory, and Why Outsiders Thrive After High School by Alexandra Robbins

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airport security, Albert Einstein, Columbine, game design, hive mind, out of africa, Skype, Slavoj Žižek, Steve Jobs, Steve Wozniak, The Wisdom of Crowds, trickle-down economics

A potluck meal wouldn’t be satisfying if everyone brought the same dish. Yet many perceived popular students demand that group members stick to the same bland fare. In the school setting, the higher a group’s status, the more likely it is to require unanimity. “The more influence a group’s members exert on each other . . . the less likely it is that the group’s decisions will be wise ones,” journalist James Surowiecki wrote in The Wisdom of Crowds. “The more influence we exert on each other, the more likely it is that we will believe the same things and make the same mistakes.” The conformity that tends to characterize student social circles, then, negates many of the benefits of belonging to a group in the first place. It is arguable that outcasts are not only courageous, not only crucial, valuable contributors to society, but also, in a way, lucky.

CHAPTER 14 the jellybean jar game: See Berns. I highly recommend Iconoclast for further reading. “The more diverse the group”: Ibid. Note: Diverse groups do not polarize. See, for example, Fishkin, James S. and Luskin, Robert C. “Experimenting with a Democratic Ideal: Deliberative Polling and Public Opinion,” Acta Politica, Vol. 40, 2005. “The more influence a group’s members”: See Surowiecki, James. The Wisdom of Crowds, New York: First Anchor Books, 2005. Acknowledgments I am exceptionally lucky to have supportive parents who have always encouraged me to be myself and clearly communicated that they love me not despite my goofy idiosyncrasies, but because those quirks help to make me who I am. A line on an acknowledgments page is not nearly enough to thank them. I especially want to thank my mom, kind and wise, caring and fun, witty and talented, cheerful and enthusiastic, and an exemplary role model.


pages: 606 words: 157,120

To Save Everything, Click Here: The Folly of Technological Solutionism by Evgeny Morozov

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3D printing, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, augmented reality, Automated Insights, Berlin Wall, big data - Walmart - Pop Tarts, Buckminster Fuller, call centre, carbon footprint, Cass Sunstein, choice architecture, citizen journalism, cloud computing, cognitive bias, crowdsourcing, data acquisition, Dava Sobel, disintermediation, East Village, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, Firefox, Francis Fukuyama: the end of history, frictionless, future of journalism, game design, Gary Taubes, Google Glasses, illegal immigration, income inequality, invention of the printing press, Jane Jacobs, Jean Tirole, Jeff Bezos, jimmy wales, Julian Assange, Kevin Kelly, Kickstarter, license plate recognition, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Narrative Science, Nicholas Carr, packet switching, PageRank, Paul Graham, Peter Singer: altruism, Peter Thiel, pets.com, placebo effect, pre–internet, Ray Kurzweil, recommendation engine, Richard Thaler, Ronald Coase, Rosa Parks, self-driving car, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Slavoj Žižek, smart meter, social graph, social web, stakhanovite, Steve Jobs, Steven Levy, Stuxnet, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, the medium is the message, The Nature of the Firm, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, transaction costs, urban decay, urban planning, urban sprawl, Vannevar Bush, WikiLeaks

The model of an ominous, gray mass quickly loses momentum.” Being successful at party politics requires a very different set of skills, attitudes, and organizational structures than successfully editing Wikipedia; small and tiny contributions by everyone might be enough to produce a decent article, but they may not be enough to build an effective political party. For all their reliance on the wisdom of crowds, the Pirates have not yet produced any meaningful positions on issues that do not touch upon the purely digital. The Pirates have little to say on matters of social inequality, the European debt crisis, or the future of climate change, not to mention gender inequality, a problem to which their own male-dominated party is a living testament. That everyone can submit a proposal and a counterproposal on the most trivial of matters also means that the Pirates spend a lot of time assessing issues’ that may not be terribly important, especially in comparison with the debt crisis or the war in Afghanistan (consider their recent discussion on whether to abolish Germany’s list of the most dangerous dogs).

Perhaps it wouldn’t be such a bad thing for our newly empowered geeks and engineers to recognize that there are good reasons not to run our politics as a startup; that our politicians face competing demands and that the quest to eradicate lies and hypocrisy may do more harm than good; that there are good reasons to value subjective but high-quality criticism, even if it doesn’t stem from the “wisdom of crowds”; that the dream of flawless communication across nations may not only be unachievable but also undesirable; that humans are complex and occasionally irrational creatures who care about why they do certain things as much as they care about what it is they are doing; that numbers often tell us less than we think and quantification as such might actually thwart reforms. But even established truths do get overturned eventually.


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Quiet: The Power of Introverts in a World That Can't Stop Talking by Susan Cain

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8-hour work day, Albert Einstein, Asperger Syndrome, Bill Gates: Altair 8800, call centre, crowdsourcing, David Brooks, delayed gratification, deliberate practice, game design, hive mind, index card, indoor plumbing, Isaac Newton, knowledge economy, knowledge worker, Mahatma Gandhi, Menlo Park, meta analysis, meta-analysis, Mikhail Gorbachev, new economy, popular electronics, Ralph Waldo Emerson, ride hailing / ride sharing, Rosa Parks, shareholder value, Silicon Valley, Steve Jobs, Steve Wozniak, telemarketer, The Wisdom of Crowds, traveling salesman, Walter Mischel, web application, white flight

But the mighty force that pulled these trends together was the rise of the World Wide Web, which lent both cool and gravitas to the idea of collaboration. On the Internet, wondrous creations were produced via shared brainpower: Linux, the open-source operating system; Wikipedia, the online encyclopedia; MoveOn.org, the grassroots political movement. These collective productions, exponentially greater than the sum of their parts, were so awe-inspiring that we came to revere the hive mind, the wisdom of crowds, the miracle of crowdsourcing. Collaboration became a sacred concept—the key multiplier for success. But then we took things a step further than the facts called for. We came to value transparency and to knock down walls—not only online but also in person. We failed to realize that what makes sense for the asynchronous, relatively anonymous interactions of the Internet might not work as well inside the face-to-face, politically charged, acoustically noisy confines of an open-plan office.

Rentfrow, “Blirtatiousness: Cognitive, Behavioral, and Physiological Consequences of Rapid Responding,” Journal of Personality and Social Psychology 81, no. 6 (2001): 1160–75. 15. We also see talkers as leaders: Simon Taggar et al., “Leadership Emergence in Autonomous Work Teams: Antecedents and Outcomes,” Personnel Psychology 52, no. 4 (Winter 1999): 899–926. (“The person that speaks most is likely to be perceived as the leader.”) 16. The more a person talks, the more other group members: James Surowiecki, The Wisdom of Crowds (New York: Doubleday Anchor, 2005), 187. 17. It also helps to speak fast: Howard Giles and Richard L. Street Jr., “Communicator Characteristics and Behavior,” in M. L. Knapp and G. R. Miller, eds., Handbook of Interpersonal Communication, 2nd ed. (Thousand Oaks, CA: Sage, 1994), 103–61. 18. college students were asked to solve math problems: Cameron Anderson and Gavin Kilduff, “Why Do Dominant Personalities Attain Influence in Face-to-Face Groups?


pages: 486 words: 148,485

Being Wrong: Adventures in the Margin of Error by Kathryn Schulz

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affirmative action, anti-communist, banking crisis, Bernie Madoff, car-free, Cass Sunstein, cognitive dissonance, colonial rule, conceptual framework, cosmological constant, cuban missile crisis, Daniel Kahneman / Amos Tversky, dark matter, desegregation, Johann Wolfgang von Goethe, lake wobegon effect, Ronald Reagan, six sigma, stem cell, Steven Pinker, Tenerife airport disaster, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, trade route

., (http://plato.stanford.edu/archives/spr2009/entries/francis-bacon); and Francis Bacon, Bacon’s Essays, Edwin A. Abbott, ed. (Longmans, Green and Co., 1886), lxxii–lxxiii. Thomas Gilovich. Thomas Gilovich, How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life (The Free Press, 1991), 112. Cass Sunstein. Cass Sunstein, Why Societies Need Dissent (Harvard University Press, 2005), v. James Surowiecki. James Surowiecki, The Wisdom of Crowds (Anchor Books, 2005), 43. John Locke and David Hume. This rejection of secondhand information as insufficient grounds for knowledge is part of the same epistemological tradition articulated by, among others, Descartes (who cautioned against believing anything based on scanty evidence) and William Clifford (James’s foil in “The Will To Believe”). “I began to realize that I believed countless things.”

Then there are the women of Saudi Arabia, who are still waiting. * To be clear, Gilovich, Surowiecki, and Sunstein all acknowledge serious limitations to this follow-the-crowd logic. Among other problems, Gilovich points out, we tend to assume that most rational people believe what we believe, so our sense of the consensus of the crowd might itself be in error. Surowiecki believes strongly in the wisdom of crowds—he is the author of a 2004 book by that name—but only if their decisions reflect the aggregation of many independently developed beliefs, rather than the belief of a few people snowballing into the belief of the masses. Sunstein, meanwhile, acknowledges the potential utility of conformity largely as a preamble to exposing its dangers, and especially its political dangers—which is the central theme of his own book, Why Societies Need Dissent


pages: 292 words: 62,575

97 Things Every Programmer Should Know by Kevlin Henney

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A Pattern Language, business intelligence, continuous integration, crowdsourcing, database schema, deliberate practice, domain-specific language, general-purpose programming language, Grace Hopper, index card, inventory management, job satisfaction, loose coupling, Silicon Valley, sorting algorithm, The Wisdom of Crowds

The act of programming marries the discrete world of computers with the fluid world of human affairs. Programmers mediate between the negotiated and uncertain truths of business and the crisp, uncompromising domain of bits and bytes and higher constructed types. With so much to know, so much to do, and so many ways of doing so, no single person or single source can lay claim to "the one true way." Instead, 97 Things Every Programmer Should Know draws on the wisdom of crowds and the voices of experience to offer not so much a coordinated big picture as a crowdsourced mosaic of what every programmer should know. This ranges from code-focused advice to culture, from algorithm usage to agile thinking, from implementation know-how to professionalism, from style to substance. The contributions do not dovetail like modular parts, and there is no intent that they should—if anything, the opposite is true.


pages: 188 words: 9,226

Collaborative Futures by Mike Linksvayer, Michael Mandiberg, Mushon Zer-Aviv

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4chan, Benjamin Mako Hill, British Empire, citizen journalism, cloud computing, collaborative economy, corporate governance, crowdsourcing, Debian, en.wikipedia.org, Firefox, informal economy, jimmy wales, Kickstarter, late capitalism, loose coupling, Marshall McLuhan, means of production, Naomi Klein, Network effects, optical character recognition, packet switching, postnationalism / post nation state, prediction markets, Richard Stallman, semantic web, Silicon Valley, slashdot, Slavoj Žižek, stealth mode startup, technoutopianism, the medium is the message, The Wisdom of Crowds, web application

This new change is then preserved and denoted by the time and user who contributed it. Social Contracts and Mediation Academic research into the techno-social dynamics of Wikipedia shows clear emergent pa erns of leadership. For example the initial content and structure outlined by the first edit of an article are o en maintained through the many future edits years on. (A Ki ur, RE Kraut; Harnessing the Wisdom of Crowds in Wikipedia: Quality through Coordination) The governance mechanism of the Wiki so ware does not value one edit over the other. Yet, what is offered by the initial author is not just the initiative for the collaboration, it is also a leading guideline that implicitly coordinates the contributions that follow. 52 Much like a state, Wikipedia then uses social contracts to mediate the relationship of contributions to the collection as a whole.


pages: 298 words: 81,200

Where Good Ideas Come from: The Natural History of Innovation by Steven Johnson

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Ada Lovelace, Albert Einstein, Alfred Russel Wallace, carbon-based life, Cass Sunstein, cleantech, complexity theory, conceptual framework, cosmic microwave background, crowdsourcing, data acquisition, digital Maoism, discovery of DNA, Dmitri Mendeleev, double entry bookkeeping, double helix, Douglas Engelbart, Drosophila, Edmond Halley, Edward Lloyd's coffeehouse, Ernest Rutherford, Geoffrey West, Santa Fe Institute, greed is good, Hans Lippershey, Henri Poincaré, hive mind, Howard Rheingold, hypertext link, invention of air conditioning, invention of movable type, invention of the printing press, invention of the telephone, Isaac Newton, Islamic Golden Age, Jacquard loom, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jaron Lanier, John Snow's cholera map, Joseph Schumpeter, Joseph-Marie Jacquard, Kevin Kelly, lone genius, Louis Daguerre, Louis Pasteur, Mason jar, Mercator projection, On the Revolutions of the Heavenly Spheres, online collectivism, packet switching, PageRank, patent troll, pattern recognition, price mechanism, profit motive, Ray Oldenburg, Richard Florida, Richard Thaler, Ronald Reagan, side project, Silicon Valley, silicon-based life, six sigma, Solar eclipse in 1919, spinning jenny, Steve Jobs, Steve Wozniak, Stewart Brand, The Death and Life of Great American Cities, The Great Good Place, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, transaction costs, urban planning

Genius, Creativity, and Leadership: Historiometric Inquiries. Cambridge, Mass.: Harvard University Press, 1984. Standage, Tom. A History of the World in Six Glasses. New York: Walker, 2005. Sternberg, Robert J. Handbook of Creativity. Cambridge, UK: Cambridge University Press, 1999. Sunstein, Cass R. Going to Extremes: How Like Minds Unite and Divide. Oxford, UK: Oxford University Press, 2009. Surowiecki, James. The Wisdom of Crowds. New York: Anchor, 2005. Swade, Doron, and Charles Babbage. The Difference Engine: Charles Babbage and the Quest to Build the First Computer. New York: Viking, 2001. Tapscott, Don, and Anthony D. Williams. Wikinomics: How Mass Collaboration Changes Everything. New York: Portfolio, 2008. Thaler, Richard H., and Cass R. Sunstein. Nudge: Improving Decisions About Health, Wealth, and Happiness.


pages: 259 words: 73,193

The End of Absence: Reclaiming What We've Lost in a World of Constant Connection by Michael Harris

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4chan, Albert Einstein, AltaVista, Andrew Keen, augmented reality, Burning Man, cognitive dissonance, crowdsourcing, dematerialisation, en.wikipedia.org, Filter Bubble, Firefox, Google Glasses, informal economy, information retrieval, invention of movable type, invention of the printing press, invisible hand, James Watt: steam engine, Jaron Lanier, jimmy wales, Kevin Kelly, Loebner Prize, Marshall McLuhan, McMansion, Nicholas Carr, pattern recognition, pre–internet, Republic of Letters, Silicon Valley, Skype, Snapchat, social web, Steve Jobs, the medium is the message, The Wisdom of Crowds, Turing test

The brightest moments of human discovery are those unplanned and random instants when you thumb through a strange book in a foreign library or talk auto maintenance with a neuroanatomist. We need our searches to include cross-wiring and dumb accidents, too, not just algorithmic surety. And besides the need for accidental connections, there’s the fact that some things, clearly, are beyond the wisdom of crowds—sometimes speed and volume should bend to make way for theory and meaning. Sometimes we do still need to quiet down the rancor of mass opinion and ask a few select voices to speak up. And doing so in past generations has never been such a problem as it is for us. They never dealt with such a glut of information or such a horde of folk eager to misrepresent it. • • • • • I’m as guilty in all this, as complicit, as the next guy.


pages: 221 words: 64,080

Different: Escaping the Competitive Herd by Youngme Moon

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AltaVista, Atul Gawande, Richard Feynman, Richard Feynman, Saturday Night Live, The Wisdom of Crowds, Thorstein Veblen, young professional

Mob psychology was an epithet. Even the word “col ective” cal ed to mind Soviet-like connotations. But in the past couple of decades, something has turned. There has been a change in the tenor of our conversation around group behavior. Today, our cultural lexicon is replete with references to a newfound optimism in the benefits of self-organizing systems. Col ective intel igence. Smart mobs. The wisdom of crowds. The central conceit in this more recent dialogue is that organic col usion of the sort that arises from intel igent, independent decision making can lead to optimal and even beautiful outcomes. I raise these two countervailing perspectives, not to argue for the validity of one over the other, but because I believe there’s a crux in their reconciliation. The latter view reminds us that there are scenarios in which a single, shared outcome can be beneficial to al .


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

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Airbnb, airport security, Al Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, centralized clearinghouse, clean water, conceptual framework, constrained optimization, continuous double auction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, helicopter parent, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uranium enrichment, Vickrey auction, winner-take-all economy

Successful internet platforms, such as eBay, Uber, and Amazon, have similarly figured out ways of making most transactions run smoothly and acting as arbitrator in those that don’t (and, in Uber’s case, using a proprietary algorithm that governs how to connect drivers and customers). The market maker can screen out undesirables from all sides of the platform, but as cases like eBay and Uber suggest, often the job is left to platform participants themselves. The platform manager makes customer feedback possible, and in theory, the wisdom of crowds takes care of the rest, solving the asymmetric information problem that George Akerlof identified as the enemy of market function back in 1970. This has led to all sorts of match-making platforms for goods or services where it was hard to find a reliable provider in the pre–internet era. If Akerlof had wanted to renovate his house in the ’70s, for instance, he would have had to find a Berkeley-area contractor who had the skills for the job, had the time to take it on, was reliable, would quote a fair price, and wouldn’t try to jack up the price once he’d knocked down a few walls.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

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Airbnb, balance sheet recession, bank run, barriers to entry, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve

It is a world in which the possibility of policy mistakes and market accidents inevitably rises. Fourth, all this makes the argument for passive versus active investment a lot more nuanced and a lot less extreme. It is not an either/or, which much of the discussion in the financial media would have you believe. Rather it is about striking the right balance: using smart passive exposures where investor conviction and foundation do not dominate the wisdom of crowds and where broad-based risk exposure is not undermined by construct defects; but, concurrently, being willing to deviate via high-conviction trades, relative positioning, and risk-management-motivated portfolio overlays. A final point in closing this chapter: The onus on smart communication is central to successfully managing a world in which technological advances engage and empower so many individuals and collectives.


pages: 270 words: 79,992

The End of Big: How the Internet Makes David the New Goliath by Nicco Mele

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3D printing, 4chan, A Declaration of the Independence of Cyberspace, Airbnb, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, Apple's 1984 Super Bowl advert, barriers to entry, Berlin Wall, big-box store, bitcoin, business climate, call centre, Cass Sunstein, centralized clearinghouse, Chelsea Manning, citizen journalism, cloud computing, collaborative consumption, collaborative editing, crony capitalism, cross-subsidies, crowdsourcing, David Brooks, death of newspapers, Donald Trump, Douglas Engelbart, en.wikipedia.org, Exxon Valdez, Fall of the Berlin Wall, Filter Bubble, Firefox, Galaxy Zoo, global supply chain, Google Chrome, Gordon Gekko, Hacker Ethic, Jaron Lanier, Jeff Bezos, jimmy wales, Julian Assange, Kevin Kelly, Khan Academy, Kickstarter, Lean Startup, Mark Zuckerberg, minimum viable product, Mohammed Bouazizi, Mother of all demos, Narrative Science, new economy, Occupy movement, Peter Thiel, pirate software, Ronald Reagan, Ronald Reagan: Tear down this wall, sharing economy, Silicon Valley, Skype, social web, Steve Jobs, Steve Wozniak, Stewart Brand, Stuxnet, Ted Nelson, Telecommunications Act of 1996, telemarketer, The Wisdom of Crowds, transaction costs, uranium enrichment, Whole Earth Catalog, WikiLeaks, Zipcar

., building Web sites for organizations, including Common Cause, a campaign-finance reform group. I loved politics but found the role of money distasteful. It felt like a complete subversion of the Founding Fathers’ notions of government of, by, and for the people. At the same time, I was becoming steeped in open-source programming and a range of heady ideas—crowd sourcing, distributed network power, the wisdom of crowds—embraced by the nerd godfathers discussed in chapter 1. Leaving Washington to pursue a nonpolitical job in New York, I immersed myself in the growing world of grassroots political blogs, which reminded me of the online communities I had encountered in high school. After September 11, 2001, becoming concerned by the growing momentum toward war in Iraq, I began to spend more and more time surfing the emerging political blogosphere, lurking on sites like MyDD.com.


pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

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Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamonds, borderless world, BRICs, British Empire, call centre, carbon footprint, charter city, clean water, cleantech, cloud computing, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, facts on the ground, failed state, friendly fire, global village, Google Earth, high net worth, index fund, informal economy, invisible hand, labour mobility, laissez-faire capitalism, Masdar, megacity, microcredit, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, oil shock, open economy, out of africa, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

Cambridge, UK: Cambridge University Press, 1991. Stromseth, Jane, David Wippman, and Rosa Brooks, eds. Can Might Make Rights? Building the Rule of Law After Military Interventions. New York: Cambridge University Press, 2006. Sullivan, Nicholas P. You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy. San Francisco: Jossey-Bass, 2007. Surowiecki, James. The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations. New York: Doubleday, 2004. SustainAbility. The 21st Century NGO in the Market for Change. London: SustainAbility, 2005. SustainAbility and the Global Compact. Gearing Up: From Corporate Responsibility to Good Governance and Scalable Solutions. London: SustainAbility, 2004.


pages: 654 words: 191,864

Thinking, Fast and Slow by Daniel Kahneman

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Albert Einstein, Atul Gawande, availability heuristic, Black Swan, Cass Sunstein, Checklist Manifesto, choice architecture, cognitive bias, complexity theory, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, delayed gratification, demand response, endowment effect, experimental economics, experimental subject, Exxon Valdez, feminist movement, framing effect, hindsight bias, index card, job satisfaction, John von Neumann, libertarian paternalism, loss aversion, medical residency, mental accounting, meta analysis, meta-analysis, nudge unit, pattern recognition, pre–internet, price anchoring, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, Ronald Reagan, The Chicago School, The Wisdom of Crowds, transaction costs, union organizing, Walter Mischel, Yom Kippur War

The uncomfortable inconsistency that was revealed when I switched to the new procedure was real: it reflected both the inadequacy of any single question as a measure of what the student knew and the unreliability of my own grading. The procedure I adopted to tame the halo effect conforms to a general principle: decorrelate error! To understand how this principle works, imagine that a large number of observers are shown glass jars containing pennies and are challenged to estimate the number of pennies in each jar. As James Surowiecki explained in his best-selling The Wisdom of Crowds, this is the kind of task in which individuals do very poorly, but pools of individual judgments do remarkably well. Some individuals greatly overestimate the true number, others underestimate it, but when many judgments are averaged, the average tends to be quite accurate. The mechanism is straightforward: all individuals look at the same jar, and all their judgments have a common basis.

Krull, and Patrick S. Malone, “Unbelieving the Unbelievable: Some Problems in the Rejection of False Information,” Journal of Personality and Social Psychology 59 (1990): 601–13. descriptions of two people: Solomon E. Asch, “Forming {#823. Impressions of Personality,” Journal of Abnormal and Social Psychology 41 (1946): 258–90. all six adjectives: Ibid. Wisdom of Crowds: James Surowiecki, The Wisdom of Crowds (New York: Anchor Books, 2005). one-sided evidence: Lyle A. Brenner, Derek J. Koehler, and Amos Tversky, “On the Evaluation of One-Sided Evidence,” Journal of Behavioral Decision Making 9 (1996): 59–70. 8: How Judgments Happen biological roots: Alexander Todorov, Sean G. Baron, and Nikolaas N. Oosterhof, “Evaluating Face Trustworthiness: A Model-Based Approach,” Social Cognitive and Affective Neuroscience 3 (2008): 119–27.


pages: 855 words: 178,507

The Information: A History, a Theory, a Flood by James Gleick

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Ada Lovelace, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, AltaVista, bank run, bioinformatics, Brownian motion, butterfly effect, citation needed, Claude Shannon: information theory, clockwork universe, computer age, conceptual framework, crowdsourcing, death of newspapers, discovery of DNA, double helix, Douglas Hofstadter, en.wikipedia.org, Eratosthenes, Fellow of the Royal Society, Gödel, Escher, Bach, Henri Poincaré, Honoré de Balzac, index card, informal economy, information retrieval, invention of the printing press, invention of writing, Isaac Newton, Jacquard loom, Jacquard loom, Jaron Lanier, jimmy wales, John von Neumann, Joseph-Marie Jacquard, Louis Daguerre, Marshall McLuhan, Menlo Park, microbiome, Milgram experiment, Network effects, New Journalism, Norbert Wiener, On the Economy of Machinery and Manufactures, PageRank, pattern recognition, phenotype, pre–internet, Ralph Waldo Emerson, RAND corporation, reversible computing, Richard Feynman, Richard Feynman, Simon Singh, Socratic dialogue, Stephen Hawking, Steven Pinker, stochastic process, talking drums, the High Line, The Wisdom of Crowds, transcontinental railway, Turing machine, Turing test, women in the workforce

In 2007 this database revealed something that had eluded distinguished critics and listeners: that more than one hundred recordings released by the late English pianist Joyce Hatto—music by Chopin, Beethoven, Mozart, Liszt, and others—were actually stolen performances by other pianists. MIT established a Center for Collective Intelligence, devoted to finding group wisdom and “harnessing” it. It remains difficult to know when and how much to trust the wisdom of crowds—the title of a 2004 book by James Surowiecki, to be distinguished from the madness of crowds as chronicled in 1841 by Charles Mackay, who declared that people “go mad in herds, while they recover their senses slowly, and one by one.”♦ Crowds turn all too quickly into mobs, with their time-honored manifestations: manias, bubbles, lynch mobs, flash mobs, crusades, mass hysteria, herd mentality, goose-stepping, conformity, groupthink—all potentially magnified by network effects and studied under the rubric of information cascades.

Information and Meaning: An Evolutionary Perspective. Berlin: Springer-Verlag, 1997. Streufert, Siegfried, Peter Suedfeld, and Michael J. Driver. “Conceptual Structure, Information Search, and Information Utilization.” Journal of Personality and Social Psychology 2, no. 5 (1965): 736–40. Sunstein, Cass R. Infotopia: How Many Minds Produce Knowledge. Oxford: Oxford University Press, 2006. Surowiecki, James. The Wisdom of Crowds. New York: Doubleday, 2004. Swade, Doron. “The World Reduced to Number.” Isis 82, no. 3 (1991): 532–36. ———. The Cogwheel Brain: Charles Babbage and the Quest to Build the First Computer. London: Little, Brown, 2000. ———. The Difference Engine: Charles Babbage and the Quest to Build the First Computer. New York: Viking, 2001. Swift, Jonathan. A Tale of a Tub: Written for the Universal Improvement of Mankind. 1692.


pages: 398 words: 86,023

The Wikipedia Revolution: How a Bunch of Nobodies Created the World's Greatest Encyclopedia by Andrew Lih

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Albert Einstein, AltaVista, barriers to entry, Benjamin Mako Hill, c2.com, Cass Sunstein, citation needed, crowdsourcing, Debian, en.wikipedia.org, Firefox, Hacker Ethic, HyperCard, index card, Jane Jacobs, Jason Scott: textfiles.com, jimmy wales, Marshall McLuhan, Network effects, optical character recognition, Ralph Waldo Emerson, Richard Stallman, side project, Silicon Valley, Skype, slashdot, social software, Steve Jobs, The Death and Life of Great American Cities, The Wisdom of Crowds, urban planning, urban renewal, Vannevar Bush, wikimedia commons, Y2K

Credentials and central control, once considered the most important parameters for generating quality content, now yield to new terms: crowdsourcing, peer production, and open source intelligence. What was once only done top-down is now being viewed bottom-up. Books and essays have addressed the impact of projects freely driven by communities of scattered individuals: The Cathedral and the Bazaar by Eric S. Raymond, The Wisdom of Crowds by James Surowiecki, The Wealth of Networks by Yochai Benkler, The Long Tail by Chris Anderson, Infotopia by Cass R. Sun-stein, and Everything Is Miscellaneous by David Weinberger. This book, however, goes in with a deeper focus on Wikipedia, explaining how it evolved to become the phenomenon it is today, and showing the fascinating community behind the articles and the unique online culture the site has fostered.


pages: 327 words: 91,351

Traders at Work: How the World's Most Successful Traders Make Their Living in the Markets by Tim Bourquin, Nicholas Mango

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algorithmic trading, automated trading system, backtesting, commodity trading advisor, Credit Default Swap, Elliott wave, fixed income, Long Term Capital Management, paper trading, pattern recognition, prediction markets, risk tolerance, Small Order Execution System, statistical arbitrage, The Wisdom of Crowds, transaction costs

But many of the wealthy traders I talked with realized early on in their trading careers that the markets are driven by human greed, fear, and panic—the same emotions that drive rioters to overturn cars and break store windows. There are several excellent trading books that aren’t actually about trading at all but nevertheless will give you insight into what drives human behavior in a variety of situations. One my favorites is The Wisdom of Crowds, by James Surowiecki (Doubleday, 2004). Another is The Art of Strategy, by Avinash Dixit and Barry Nalebuff (W. W. Norton & Company, 2008). And finally, a third book I recommend is Markets, Mobs, and Mayhem, by Robert Menschel (Wiley, 2002). Books that address the basic premises of human nature will give you a new perspective on how supply and demand in any market move prices—and price is king.


pages: 266 words: 86,324

The Drunkard's Walk: How Randomness Rules Our Lives by Leonard Mlodinow

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Albert Einstein, Alfred Russel Wallace, Antoine Gombaud: Chevalier de Méré, Atul Gawande, Brownian motion, butterfly effect, correlation coefficient, Daniel Kahneman / Amos Tversky, Donald Trump, feminist movement, forensic accounting, Gerolamo Cardano, Henri Poincaré, index fund, Isaac Newton, law of one price, pattern recognition, Paul Erdős, probability theory / Blaise Pascal / Pierre de Fermat, RAND corporation, random walk, Richard Feynman, Richard Feynman, Ronald Reagan, Stephen Hawking, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, V2 rocket, Watson beat the top human players on Jeopardy!

Craig Brown, “Administrative Succession and Organizational Performance: The Succession Effect,” Administrative Science Quarterly 27, no. 1 (March 1982): 1–16; on baseball, Oscar Grusky, “Managerial Succession and Organizational Effectiveness,” American Journal of Sociology 69, no. 1 (July 1963): 21–31, and William A. Gamson and Norman A. Scotch, “Scapegoating in Baseball,” American Journal of Sociology 70, no. 1 (July 1964): 69–72; on soccer, Ruud H. Koning, “An Econometric Evaluation of the Effect of Firing a Coach on Team Performance,” Applied Economics 35, no. 5 (March 2003): 555–64. 3. James Surowiecki, The Wisdom of Crowds (New York: Doubleday, 2004), pp. 218–19. 4. Armen Alchian, “Uncertainty, Evolution, and Economic Theory,” Journal of Political Economy 58, no. 3 (June 1950): 213. Chapter 1: Peering through the Eyepiece of Randomness 1. Kerstin Preuschoff, Peter Bossaerts, and Steven R. Quartz, “Neural Differentiation of Expected Reward and Risk in Human Subcortical Structures,” Neuron 51 (August 3, 2006): 381–90. 2.


pages: 459 words: 103,153

Adapt: Why Success Always Starts With Failure by Tim Harford

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Andrew Wiles, banking crisis, Basel III, Berlin Wall, Bernie Madoff, Black Swan, car-free, carbon footprint, Cass Sunstein, charter city, Clayton Christensen, clean water, cloud computing, cognitive dissonance, complexity theory, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, Deep Water Horizon, Deng Xiaoping, double entry bookkeeping, Edmond Halley, en.wikipedia.org, Erik Brynjolfsson, experimental subject, Fall of the Berlin Wall, Fermat's Last Theorem, Firefox, food miles, Gerolamo Cardano, global supply chain, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, Jarndyce and Jarndyce, John Harrison: Longitude, knowledge worker, loose coupling, Martin Wolf, Menlo Park, Mikhail Gorbachev, mutually assured destruction, Netflix Prize, New Urbanism, Nick Leeson, PageRank, Piper Alpha, profit motive, Richard Florida, Richard Thaler, rolodex, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, South China Sea, special economic zone, spectrum auction, Steve Jobs, supply-chain management, the market place, The Wisdom of Crowds, too big to fail, trade route, Tyler Cowen: Great Stagnation, web application, X Prize

Available at: http://www.deakin.edu.au/hmnbs/psychol-ogy/gagepage/ 22 When Palchinsky sent back his findings: Loren Graham, The Ghost of the Executed Engineer: Technology and the Fall of the Soviet Union (Cambridge, MA: Harvard University Press, 1993), pp. 51–5. 25 ‘For a day and a half’: quoted in Graham, The Ghost of the Executed Engineer, p. 69. 25 When the US historian Stephen Kotkin: Stephen Kotkin, Steeltown USSR (Berkeley: University of California Press, 1991), p. 254. 26 In Magnitogorsk, there were two types: Graham, The Ghost of the Executed Engineer, p. 75. 26 There had be no trial: Graham, The Ghost of the Executed Engineer, p. 46. 28 ‘You can be watching TV’: Andy Warhol, The Philosophy of Andy Warhol (New York: Harcourt, 1975), p. 100. 30 He had been in power for eight years at the time: Tim Harford, ‘How a Celebrity Chef Turned into a Social Scientist’, Financial Times, 7 November 2009. Available at: http://timharford.com/2009/11/how-a-celebrity-chef-turned-into-a-social-scientist/; and Michele Belot and Jonathan James, ‘Healthy School Meals and Educational Achievements’, Nuffield College Working Paper. Available at: http://cess-wb.nuff.ox.ac.uk/downloads/schoolmeals.pdf 30 There is some evidence that the more ambitious: see James Surowiecki, The Wisdom of Crowds (London: Abacus, 2005), pp. 253–4. Surowiecki refers to two studies that reach this commonsense conclusion, but I have not been able to discover a precise citation. 30 Even when leaders and managers: Mancur Olson, Power and Prosperity (New York: Basic Books, 2000), pp. 138–9. 31 I spent the summer of 2005 studying poker: Tim Harford, ‘The Poker Machine’, Financial Times, 6 May 2006.


pages: 323 words: 95,939

Present Shock: When Everything Happens Now by Douglas Rushkoff

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algorithmic trading, Andrew Keen, bank run, Benoit Mandelbrot, big-box store, Black Swan, British Empire, Buckminster Fuller, cashless society, citizen journalism, clockwork universe, cognitive dissonance, Credit Default Swap, crowdsourcing, Danny Hillis, disintermediation, Donald Trump, double helix, East Village, Elliott wave, European colonialism, Extropian, facts on the ground, Flash crash, game design, global supply chain, global village, Howard Rheingold, hypertext link, Inbox Zero, invention of agriculture, invention of hypertext, invisible hand, iterative process, John Nash: game theory, Kevin Kelly, laissez-faire capitalism, Law of Accelerating Returns, loss aversion, mandelbrot fractal, Marshall McLuhan, Merlin Mann, Milgram experiment, mutually assured destruction, Network effects, New Urbanism, Nicholas Carr, Norbert Wiener, Occupy movement, passive investing, pattern recognition, peak oil, price mechanism, prisoner's dilemma, Ralph Nelson Elliott, RAND corporation, Ray Kurzweil, recommendation engine, Silicon Valley, Skype, social graph, South Sea Bubble, Steve Jobs, Steve Wozniak, Steven Pinker, Stewart Brand, supply-chain management, the medium is the message, The Wisdom of Crowds, theory of mind, Turing test, upwardly mobile, Whole Earth Catalog, WikiLeaks, Y2K

The phenomenon is ubiquitous, and not just in economic markets: What makes everyone suddenly drive SUVs, name their daughters Madison rather than Ethel or Linda, wear their baseball caps backwards, raise their pitch at the end of a sentence? The process is still poorly understood by social science, with its search for external causes of behavior, but is essential to bridging the largest chasm in intellectual life: that between individual psychology and collective culture.”13 As above, so below. The effort to make things on different levels conform to the same rules had become explicit. Economics writer and The Wisdom of Crowds author James Surowiecki explained to libertarian Reason magazine that Hayek’s notion of catallaxy—amplified by Santa Fe’s computers—could well become a universal approach to understanding humans: “In the 20th Century, this insight helped change the way people thought about markets. In the next century, it should change the way people think about organizations, networks, and the social order more generally.”14 And so scientists, economists, cultural theorists, and even military strategists15 end up adopting fractalnoia as the new approach to describing and predicting the behavior of both individual actors and the greater systems in which they live.


pages: 422 words: 89,770

Death of the Liberal Class by Chris Hedges

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1960s counterculture, Albert Einstein, Berlin Wall, call centre, clean water, collective bargaining, Columbine, corporate governance, deindustrialization, desegregation, Donald Trump, Fall of the Berlin Wall, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, hive mind, housing crisis, Howard Zinn, illegal immigration, Jane Jacobs, Jaron Lanier, Lao Tzu, post scarcity, profit motive, Ralph Nader, Ronald Reagan, strikebreaker, the scientific method, The Wisdom of Crowds, Tobin tax, union organizing, Unsafe at Any Speed, Upton Sinclair, WikiLeaks, working poor, Works Progress Administration

A crowd can turn into a mean mob all too easily, as it has throughout human history. “There are some things crowds can do, such as count the jelly beans in the jar or guess the weight of the ox,” Lanier said:I acknowledge this phenomenon is real. But I propose that the line between when crowds can think effectively as a crowd and when they can’t is a little different. If you read [James] Surowiecki’s The Wisdom of Crowds, he, as well as other theorists, say that if you want a crowd to be wise, the key is to reduce the communication flow between the members so they do not influence each other, so they are truly independent and have separate sample points. It brings up an interesting paradox. The starting point for online crowd enthusiasts is that connection is good and everyone should be connected. But when they talk about what makes a crowd smart, they say people should not be talking to each other.


pages: 351 words: 100,791

The World Beyond Your Head: On Becoming an Individual in an Age of Distraction by Matthew B. Crawford

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airport security, Cass Sunstein, choice architecture, collateralized debt obligation, David Brooks, delayed gratification, dematerialisation, deskilling, digital Maoism, Google Glasses, hive mind, index card, informal economy, Jaron Lanier, large denomination, new economy, new new economy, online collectivism, Plutocrats, plutocrats, Richard Thaler, Rodney Brooks, self-driving car, Silicon Valley, Silicon Valley ideology, the built environment, the scientific method, The Wisdom of Crowds, theory of mind, Walter Mischel, winner-take-all economy

The effect of this publicity was to make no place safe from the idea of normalcy.5 INDIVIDUALITY IS PASSÉ Merely to raise concern about the fate of individuality in contemporary culture is probably to appear old-fashioned. It would seem to be a 1950s through 1970s sort of preoccupation, the stuff of The Catcher in the Rye or the cigarette and hi-fi advertisements in your dad’s old Playboys. “Conformity” was the great worry of half a century ago. Now we are fascinated with “the wisdom of crowds” and “the hive mind.” We are told that there is a superior global intelligence arising in the Web itself. This collective mind is more meta, more synoptic and synthetic, than any one of us, and aren’t these the defining features of intelligence? Of course all this crowd-loving lines up pretty well with Silicon Valley’s distaste for the concept of intellectual property, and with the fact that there is a lot more money to be made as an aggregator of “content” than as a producer of it.


pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

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asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, working poor, yield curve

Market Markets are frequently spoken of as if they have thoughts and feelings and intentions, and this puzzles outsiders: I’ve often been asked what on earth it means when commentators say, “The market thinks that . . .” The answer is that markets aggregate a whole range of widely divergent views and end up in effect expressing a single aggregate opinion. This process is discussed fascinatingly and at length in James Surowiecki’s brilliant book The Wisdom of Crowds. It’s often an aid to clarity to regard the market as an individual, expressing an individual view: “The market hates sterling today,” for instance, even though many of the people taking part in that market in fact think the exact opposite. It is crucial to remember that this individual, dubbed Mr. Market by Ben Graham in his book The Intelligent Investor in 1949, is bipolar. His moods are all over the place, and he has a particular tendency to veer between irrational optimism and equally irrational despair.


pages: 487 words: 132,252

The Fry Chronicles: An Autobiography by Stephen Fry

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Alistair Cooke, back-to-the-land, Desert Island Discs, Etonian, Isaac Newton, pre–internet, Ronald Reagan, Saturday Night Live, South China Sea, The Wisdom of Crowds, University of East Anglia, Winter of Discontent

Film producers, shock jocks, insurgents, journalists, American military – all kinds of people we might reasonably expect to write off as mentally negligible have cunning, insight and intellect well beyond what is comfortable for us. This inconvenient truth extends to those on whom we lavish our patronizing pity too. If the social-networking services of the digital age teach us anything it is that only a fool would underestimate the intelligence, intuition and cognitive skills of the ‘masses’. I am talking about more than the ‘wisdom of crowds’ here. If you look beyond sillinesses like the puzzling inability of the majority to distinguish between your and you’re, its and it’s and there, they’re and their (all of which distinctions have nothing to do with language, only with grammar and orthographical convention: after all logic and consistency would suggest the insertion of a genitival apostrophe in the pronominal possessive its, but convention has decided, perhaps to avoid confusion with the elided it is, to dispense with one), if, as I say, you look beyond such pernickety pedantries, you will see that it is possible to be a fan of reality TV, talent shows and bubblegum pop and still have a brain.


pages: 302 words: 82,233

Beautiful security by Andy Oram, John Viega

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Albert Einstein, Amazon Web Services, business intelligence, business process, call centre, cloud computing, corporate governance, credit crunch, crowdsourcing, defense in depth, en.wikipedia.org, fault tolerance, Firefox, loose coupling, market design, Monroe Doctrine, new economy, Nicholas Carr, Nick Leeson, Norbert Wiener, optical character recognition, packet switching, performance metric, pirate software, Search for Extraterrestrial Intelligence, security theater, SETI@home, Silicon Valley, Skype, software as a service, statistical model, Steven Levy, The Wisdom of Crowds, Upton Sinclair, web application, web of trust, x509 certificate, zero day, Zimmermann PGP

Within days, mailing lists such as “Daily Dave” were collaborating to speculate about what the exploit was and even share code. Imagine the effectiveness of a more professional social network where security engineers could share empirical data and results from tests and experiments. Security in Numbers Social networking isn’t just about connecting people into groups to trade. It’s a medium for crowdsourcing, which exploits the wisdom of crowds to predict information. This could also play an interesting role in the future security market. To give you a simple example of crowdsourcing, one Friday at work someone on my team sent out a simple spreadsheet containing a quiz. It was late morning on the East Coast, and therefore late on Friday afternoon in Europe and late evening in our Hyderabad office. Most people on the team were in Redmond and so were sitting in traffic; most Brits were getting ready to drink beer and eat curry on Friday evening; and most Indians were out celebrating life.


pages: 416 words: 118,592

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel

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accounting loophole / creative accounting, Albert Einstein, asset allocation, asset-backed security, backtesting, Bernie Madoff, BRICs, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Elliott wave, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial innovation, fixed income, framing effect, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Long Term Capital Management, loss aversion, margin call, market bubble, mortgage tax deduction, new economy, Own Your Own Home, passive investing, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, The Myth of the Rational Market, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond

Arcane as this all may seem, the representativeness heuristic is likely to account for a number of investing mistakes such as chasing hot funds or excessive extrapolation from recent evidence. Herding In general, research shows that groups tend to make better decisions than individuals. If more information is shared, and if differing points of view are considered, informed discussion of the group improves the decision-making process. The wisdom of crowd behavior is perhaps best illustrated in the economy as a whole by the free-market price system. A variety of individual decisions by consumers and producers leads the economy to produce the goods and services that people want to buy. Responding to the forces of demand and supply, the price system guides the economy through Adam Smith’s invisible hand to produce the correct quantity of products.


pages: 298 words: 43,745

Understanding Sponsored Search: Core Elements of Keyword Advertising by Jim Jansen

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AltaVista, barriers to entry, Black Swan, bounce rate, business intelligence, butterfly effect, call centre, Claude Shannon: information theory, complexity theory, correlation does not imply causation, en.wikipedia.org, first-price auction, information retrieval, inventory management, life extension, linear programming, megacity, Nash equilibrium, Network effects, PageRank, place-making, price mechanism, psychological pricing, random walk, Schrödinger's Cat, sealed-bid auction, search engine result page, second-price auction, second-price sealed-bid, sentiment analysis, social web, software as a service, stochastic process, telemarketer, the market place, The Present Situation in Quantum Mechanics, the scientific method, The Wisdom of Crowds, Vickrey auction, yield management

The Seattle Times, http://seattletimes.nwsource.com/html/businesstechnology/2002970721_microsoft04.html. ╇ [4] McAeee, R. P. and McMillan, J. 1987. “Auctions and Bidding.” Journal of Economic Literature, vol. 25(2), pp. 699–738. ╇ [5] Krishna, V. 2002. Auction Theory. San Diego, CA: Academic Press. ╇ [6] Varian, H. R. 2007. “Position Auctions.” International Journal of Industrial Organization, vol. 25(6), pp. 1163–1178. ╇ [7] Surowiecki, J. 2004. The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations. New York: Random House. ╇ [8] Jansen, B. J. and Mullen, T. 2008. “Sponsored Search: An Overview of the Concept, History, and Technology.” International Journal of Electronic Business, vol. 6(2), pp. 114–131. ╇ [9] Zhou, Y. and Lukose, R. 2006. “Vindictive Bidding in Keyword Auctions.”


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

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airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, offshore financial centre, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, traffic fines, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K

Beaman, Bonnel Kentz, Edward Diener, and Soren Svanum (1979), “Self-Awareness and Transgression in Children: Two Field Studies,” Journal of Personality & Social Psychology, 37:1835–46. There's a great word Oliver Conway (22 Jun 2004), “Congo Word ‘Most Untranslatable,'” BBC News. Quakers would cooperate Adrian Cadbury (2003), “Beliefs and Business: The Experience of Quaker Companies,” The Foundation of Lady Katherine Leveson. James Surowiecki (2004), The Wisdom of Crowds, Anchor. Steven Davison (2011), “The Double-Culture Period: Factors in Quaker Success,” unpublished manuscript. Maghribi traders Avner Greif (2008), “Contract Enforcement and Institutions among the Maghribi Traders: Refuting Edwards and Ogilvie,” SIEPR Discussion Paper 08–018, Stanford Institute for Economic Policy Research. Robert Putnam Robert Putnam (2007), “E Pluribus Unum: Diversity and Community in the Twenty-First Century,” Scandinavian Political Studies, 30:137–74.


pages: 565 words: 151,129

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism by Jeremy Rifkin

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3D printing, additive manufacturing, Airbnb, autonomous vehicles, back-to-the-land, big-box store, bioinformatics, bitcoin, business process, Chris Urmson, clean water, cleantech, cloud computing, collaborative consumption, collaborative economy, Community Supported Agriculture, computer vision, crowdsourcing, demographic transition, distributed generation, en.wikipedia.org, Frederick Winslow Taylor, global supply chain, global village, Hacker Ethic, industrial robot, informal economy, intermodal, Internet of things, invisible hand, Isaac Newton, James Watt: steam engine, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Julian Assange, Kickstarter, knowledge worker, labour mobility, Mahatma Gandhi, manufacturing employment, Mark Zuckerberg, market design, means of production, meta analysis, meta-analysis, natural language processing, new economy, New Urbanism, nuclear winter, Occupy movement, oil shale / tar sands, pattern recognition, peer-to-peer lending, personalized medicine, phenotype, planetary scale, price discrimination, profit motive, RAND corporation, randomized controlled trial, Ray Kurzweil, RFID, Richard Stallman, risk/return, Ronald Coase, search inside the book, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, smart grid, smart meter, social web, software as a service, spectrum auction, Steve Jobs, Stewart Brand, the built environment, The Nature of the Firm, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, transaction costs, urban planning, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog, Whole Earth Review, WikiLeaks, working poor, Zipcar

Berkeley: University of California Press, 1995. Steiner, Christopher. Automate This: How Algorithms Came to Rule Our World. New York: Penguin Group, 2012. Stover, John F. American Railroads. Chicago: University of Chicago Press, 1961. Suárez-Orozco, Marcelo, ed. Learning in the Global Era: International Perspectives on Globalization and Education. Berkeley: University of California Press, 2007. Surowiecki, James. The Wisdom of Crowds. New York: Doubleday, 2004. Tapscott, Don and Anthony Williams. MacroWikinomics: Rebooting Business and the World. New York: Portfolio Penguin, 2010. Tawney, R. H. Religion and the Rise of Capitalism. New Brunswick, NJ: Transaction, 2011. ———. The Acquisitive Society. New York: Harcourt, Brace & Co., 1920. The Dalai Lama and Howard Cutler. The Art of Happiness. London: Hodder and Stoughton, 2009.


pages: 418 words: 128,965

The Master Switch: The Rise and Fall of Information Empires by Tim Wu

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accounting loophole / creative accounting, Alfred Russel Wallace, Apple II, barriers to entry, British Empire, Burning Man, Cass Sunstein, Clayton Christensen, don't be evil, Douglas Engelbart, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, road to serfdom, Ronald Coase, shareholder value, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Telecommunications Act of 1996, The Chicago School, The Death and Life of Great American Cities, the market place, The Wisdom of Crowds, too big to fail, Upton Sinclair, urban planning

The institution of the festival—once the only exhibition chance for the potential art-house film, of which many were made but few were chosen—slowly evolved into something of a filter or wholesale market. Firms like Miramax, and its imitators like Sony Film Classics and Fine Line, began to see that by buying low and selling high, exposure to independent film could be profitable again. There is a certain genius to the approach, which might be said to depend on the wisdom of crowds over the judgment of a single producer. Given the quarry, there may be no other realistic way of hunting for it: nearly ten thousand independent films are produced in the United States every year, and thousands more are made abroad. As with any other commodity, most are average or below average, but some will be brilliant; among that smaller cohort, an even smaller portion will have potential for popularity with the public.


pages: 525 words: 116,295

The New Digital Age: Transforming Nations, Businesses, and Our Lives by Eric Schmidt, Jared Cohen

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3D printing, access to a mobile phone, additive manufacturing, airport security, Amazon Mechanical Turk, Amazon Web Services, anti-communist, augmented reality, Ayatollah Khomeini, barriers to entry, bitcoin, borderless world, call centre, Chelsea Manning, citizen journalism, clean water, cloud computing, crowdsourcing, data acquisition, Dean Kamen, Elon Musk, failed state, fear of failure, Filter Bubble, Google Earth, Google Glasses, hive mind, income inequality, information trail, invention of the printing press, job automation, Julian Assange, Khan Academy, Kickstarter, knowledge economy, Law of Accelerating Returns, market fundamentalism, means of production, mobile money, mutually assured destruction, Naomi Klein, offshore financial centre, peer-to-peer lending, personalized medicine, Peter Singer: altruism, Ray Kurzweil, RFID, self-driving car, sentiment analysis, Silicon Valley, Skype, Snapchat, social graph, speech recognition, Steve Jobs, Steven Pinker, Stewart Brand, Stuxnet, The Wisdom of Crowds, upwardly mobile, Whole Earth Catalog, WikiLeaks, young professional, zero day

For those who are already connected, living in both the physical and the virtual worlds has become part of who we are and what we do. As we grow accustomed to this change, we also learn that the two worlds are not mutually exclusive, and what happens in one has consequences in the other. What seem like defined debates today over security and privacy will broaden to questions of who controls and influences virtual identities and thus citizens themselves. Democracies will become more influenced by the wisdom of crowds (for better or for worse), poor autocracies will struggle to acquire the necessary resources to effectively extend control into the virtual world, and wealthier dictatorships will build modern police states that tighten their grip on citizens’ lives. These changes will spur new behaviors and progressive laws, but given the sophistication of the technologies involved, in most cases citizens stand to lose many of the protections they feel and rely upon today.


pages: 404 words: 124,705

The Village Effect: How Face-To-Face Contact Can Make Us Healthier, Happier, and Smarter by Susan Pinker

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Atul Gawande, Bernie Madoff, call centre, cognitive dissonance, David Brooks, delayed gratification, Edward Glaeser, epigenetics, Erik Brynjolfsson, estate planning, facts on the ground, game design, happiness index / gross national happiness, indoor plumbing, invisible hand, Mark Zuckerberg, medical residency, Menlo Park, meta analysis, meta-analysis, neurotypical, Occupy movement, place-making, Ponzi scheme, Ralph Waldo Emerson, randomized controlled trial, Ray Oldenburg, Silicon Valley, Skype, Steven Pinker, The Great Good Place, The Wisdom of Crowds, theory of mind, Tony Hsieh, urban planning, Yogi Berra

Instead of offering little to no training, basement-level wages, constantly changing schedules, minimal benefits, and no opportunities to move up (as experienced by nearly 20 percent of the American workforce), they “eliminated waste in everything but staffing, and let employees make some decisions,” she wrote.48 Their stores are better places to work, obviously, but they also generate more profit per square foot than their barebones competitors. Citing a study showing that every extra dollar a five-hundred-store retailer spent on payroll netted it between $4 and $28 in new sales, James Surowiecki, author of The Wisdom of Crowds, points out that the opposite is also true: cutting back on human resources can harm a business. Of course, if you have a lousy product selection, a bigger payroll won’t help much. But there’s a strong case to be made that corporate America’s fetish for cost-cutting has gone too far.… When Bob Nardelli took over Home Depot, in 2000, he reduced the number of salespeople on the floor and turned many full-time jobs into part-time ones.


pages: 481 words: 125,946

What to Think About Machines That Think: Today's Leading Thinkers on the Age of Machine Intelligence by John Brockman

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3D printing, agricultural Revolution, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, artificial general intelligence, augmented reality, autonomous vehicles, bitcoin, blockchain, clean water, cognitive dissonance, Colonization of Mars, complexity theory, computer age, computer vision, constrained optimization, corporate personhood, cosmological principle, cryptocurrency, cuban missile crisis, Danny Hillis, dark matter, discrete time, Elon Musk, Emanuel Derman, endowment effect, epigenetics, Ernest Rutherford, experimental economics, Flash crash, friendly AI, Google Glasses, hive mind, income inequality, information trail, Internet of things, invention of writing, iterative process, Jaron Lanier, job automation, John von Neumann, Kevin Kelly, knowledge worker, loose coupling, microbiome, Moneyball by Michael Lewis explains big data, natural language processing, Network effects, Norbert Wiener, pattern recognition, Peter Singer: altruism, phenotype, planetary scale, Ray Kurzweil, recommendation engine, Republic of Letters, RFID, Richard Thaler, Rory Sutherland, Search for Extraterrestrial Intelligence, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, speech recognition, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, strong AI, Stuxnet, superintelligent machines, supervolcano, the scientific method, The Wisdom of Crowds, theory of mind, Thorstein Veblen, too big to fail, Turing machine, Turing test, Von Neumann architecture, Watson beat the top human players on Jeopardy!, Y2K

HUMAN RESPONSIBILITY MARGARET LEVI Director, Center For Advanced Study in the Behavioral Sciences, Stanford University; Jere L. Bacharach Professor Emerita of International Studies, University of Washington There are tasks, even work, best done by machines who can think—at least in the sense of sorting, matching, and solving certain decision and diagnostic problems beyond the cognitive abilities of most (all?) humans. The algorithms of Amazon, Google, Facebook, etc., build on but surpass the wisdom of crowds in speed and possibly accuracy. With machines that do some of our thinking and some of our work, we may yet approach the Marxian utopia that frees us from boring and dehumanizing labor. But this liberation comes with potential costs. Human welfare is more than the replacement of workers with machines. It also requires attention to how those who lose their jobs will support themselves and their children, how they will spend the time they once spent at work.


pages: 497 words: 130,817

Pedigree: How Elite Students Get Elite Jobs by Lauren A. Rivera

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affirmative action, availability heuristic, barriers to entry, Donald Trump, fundamental attribution error, glass ceiling, income inequality, job satisfaction, knowledge economy, meta analysis, meta-analysis, new economy, performance metric, profit maximization, profit motive, school choice, Silicon Valley, Silicon Valley startup, The Wisdom of Crowds, unpaid internship, women in the workforce, young professional

Berkeley: University of California Press. Streib, Jessi. 2011. “Class Reproduction by Four Year Olds.” Qualitative Sociology 34:337–52. Stuber, Jenny M. 2009. “Class, Culture, and Participation in the Collegiate Extra-Curriculum.” Sociological Forum 24:877–900. ———. 2011. Inside the College Gates: How Class and Culture Matter in Higher Education. Lanham, MD: Lexington Books. Surowiecki, James. 2005. The Wisdom of Crowds. New York: Knopf Doubleday. Swidler, Ann. 1986. “Culture in Action: Symbols and Strategies.” American Sociological Review 51:273–86. Thorndike, Edward. 1920. “A Constant Error in Psychological Ratings.” Journal of Applied Psychology 4:25–29. Tilcsik, András. 2011. “Pride and Prejudice: Employment Discrimination against Openly Gay Men in the United States.” American Journal of Sociology 117:586–626.


pages: 309 words: 114,984

The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age by Robert Wachter

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Affordable Care Act / Obamacare, AI winter, Airbnb, Atul Gawande, Captain Sullenberger Hudson, Checklist Manifesto, Clayton Christensen, collapse of Lehman Brothers, computer age, crowdsourcing, deskilling, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, Google Glasses, Ignaz Semmelweis: hand washing, Internet of things, job satisfaction, Joseph Schumpeter, knowledge worker, medical malpractice, medical residency, Menlo Park, minimum viable product, natural language processing, Network effects, Nicholas Carr, obamacare, pattern recognition, personalized medicine, pets.com, Productivity paradox, Ralph Nader, RAND corporation, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, Skype, Snapchat, software as a service, Steve Jobs, Steven Levy, the payments system, The Wisdom of Crowds, Toyota Production System, Uber for X, Watson beat the top human players on Jeopardy!, Yogi Berra

One of the positive aspects of our new digital world is that it creates new ways for patients to be active participants in their care. As exciting as this is, I also worry about it. With the advent of widespread and increasingly expensive copayments and deductibles, the temptation for patients to self-diagnose, self-treat, and crowdsource medical advice over the Web will become irresistible. After all, how many of us consult “expert” restaurant reviews anymore? We trust the wisdom of crowds on sites like Yelp and TripAdvisor. As we enter a similarly information-rich world in healthcare, patients will face this question with greater frequency: When do I really need to consult with, and trust, a credentialed expert? There will be times when the answer is obvious, but increasingly the line will be shifting and subtle. There is a famous story about Franz Ingelfinger, the editor of the New England Journal of Medicine from 1967 to 1976 and, at the time, one of the most powerful people in medicine.


pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

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Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, buy low sell high, capital controls, central bank independence, Chance favours the prepared mind, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, diversification, diversified portfolio, family office, fixed income, glass ceiling, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, Long Term Capital Management, margin call, market bubble, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, new economy, Nick Leeson, oil shale / tar sands, oil shock, out of africa, paper trading, Peter Thiel, price anchoring, purchasing power parity, reserve currency, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

I never locked myself down to investing in one style or in one country because the greatest trade in the world could be happening somewhere else. My advice would be to make sure that you do not become too much of an THE FAMILY OFFICE MANAGER 43 expert in one area. Even if you see an area that is inefficient today, it’s likely that it won’t be inefficient tomorrow. Expertise is overrated. There’s a book called The Wisdom of Crowds (by James Suroweicki) that contains a lot of examples where the average results of a group were much better estimators than expert opinions. We wrongly tend to look at other people as experts. If you ask currency experts where an exchange rate is going, they are just as likely to be wrong as some average guy on the street. One also needs to learn to fight certain human biases such as buying into stories.The thing that gets fundamental discretionary traders involved in trades is stories because we can grasp onto them.


pages: 405 words: 121,531

Influence: Science and Practice by Robert B. Cialdini

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Albert Einstein, attribution theory, bank run, cognitive dissonance, conceptual framework, desegregation, experimental subject, Mars Rover, meta analysis, meta-analysis, Mikhail Gorbachev, Milgram experiment, Ralph Waldo Emerson, telemarketer, The Wisdom of Crowds

Sweetening the till—the use of candy to increase restaurant tipping. Journal of Applied Social Psychology, 32, 300–309. Styron, W. (1977). A farewell to arms. New York Review of Books, 24, 3–4. Suedfeld, P., Bochner, S., & Matas, C. (1971). Petitioner’s attire and petition signing by peace demonstrators: A field experiment. Journal of Applied Social Psychology, 1, 278–283. Surowiecki, J. (2004). The wisdom of crowds. New York: Doubleday. Swap, W. C. (1977). Interpersonal attraction and repeated exposure to rewards and punishers. Personality and Social Psychology Bulletin, 3, 248–251. Szabo, L. (2007, February 5). Patient protect thyself. USA Today, p. 8D. Taylor, R. (1978). Marilyn’s friends and Rita’s customers: A study of party selling as play and as work. Sociological Review, 26, 573–611.

Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies by Jeremy J. Siegel

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asset allocation, backtesting, Black-Scholes formula, Bretton Woods, buy low sell high, California gold rush, capital asset pricing model, cognitive dissonance, compound rate of return, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fixed income, German hyperinflation, implied volatility, index arbitrage, index fund, Isaac Newton, joint-stock company, Long Term Capital Management, loss aversion, market bubble, mental accounting, new economy, oil shock, passive investing, prediction markets, price anchoring, price stability, purchasing power parity, random walk, Richard Thaler, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, technology bubble, The Great Moderation, The Wisdom of Crowds, transaction costs, tulip mania, Vanguard fund

There are many times when the “crowd” is right,9 but often following the crowd can lead you astray. 7 Morton Deutsch and Harold B. Gerard, “A Study of Normative and Informational Social Influences upon Individual Judgment,” Journal of Abnormal and Social Psychology, vol. 51 (1955), pp. 629–636. 8 Charles Mackay, Memoirs of Extraordinary Popular Delusions and the Madness of Crowd, London: Bentley, 1841. 9 See James Surowiecki, The Wisdom of Crowds, New York: Anchor Books, 2005. CHAPTER 19 Behavioral Finance and the Psychology of Investing 325 Dave, have you ever been in a new town and found yourself choosing between two restaurants? One perfectly rational way of deciding, if they are close in distance, is to see which restaurant is busier since there’s a good chance that at least some of those patrons have tried both restaurants and have chosen to eat at the better one.

Goddess of the Market: Ayn Rand and the American Right by Jennifer Burns

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anti-communist, bank run, barriers to entry, centralized clearinghouse, collective bargaining, desegregation, feminist movement, financial independence, George Gilder, invisible hand, jimmy wales, Joseph Schumpeter, knowledge worker, laissez-faire capitalism, lone genius, Menlo Park, minimum wage unemployment, Mont Pelerin Society, new economy, offshore financial centre, Ponzi scheme, profit motive, RAND corporation, rent control, road to serfdom, rolodex, Ronald Reagan, side project, Stewart Brand, The Chicago School, The Wisdom of Crowds, union organizing, urban renewal, white flight, Whole Earth Catalog

Among her high-profile fans is Wikipedia’s founder Jimmy Wales, once an active participant in the listserv controversies of the Objectivist Center. A nonprofit that depends on charitable donations, Wikipedia may ultimately put its rival encyclopedias out of business. At the root of Wikipedia are warring sensibilities that seem to both embody and defy Rand’s beliefs. The website’s emphasis on individual empowerment, the value of knowledge, and its own risky organizational model reflects Rand’s sensibility. But its trust in the wisdom of crowds, celebration of the social nature of knowledge, and faith that many working together will produce something of enduring value contradict Rand’s adage “All creation is individual.” Similar contradictions undergird the response to Rand of Craig Newmark, the founder of the online advertising site Craigslist. Like Wales, Newmark was once an active member of the libertarian subculture, reading “a few things by Ayn Rand, even making a pilgrimage to her offices,” and later becoming a member of the Society for Individual Liberty.


pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

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Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Bretton Woods, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, corporate governance, corporate social responsibility, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer lending, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social software, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, unbanked and underbanked, underbanked, unorthodox policies, X Prize, Y2K, Zipcar

Interview with Erik Voorhees, June 16, 2015. 78. www.sec.gov/about/laws/sa33.pdf. 79. http://www.wired.com/2015/12/sec-approves-plan-to-issue-company-stock-via-the-bitcoin-blockchain/. 80. http://investors.overstock.com/mobile.view?c=131091&v=203&d=1&id=2073583. 81. https://bitcoinmagazine.com/21007/nasdaq-selects-bitcoin-startup-chain-run-pilot-private-market-arm/. 82. James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations (New York: Doubleday, 2014). 83. www.augur.net. 84. From e-mail exchange with the Augur team: Jack Peterson, Core Developer; Joey Krug, Core Developer; Peronet Despeignes, SpecialOps. 85. Interview with Andreas Antonopoulos, December 8, 2014. 86. Interview with Barry Silbert, September 22, 2015. 87.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

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Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, invisible hand, Isaac Newton, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, New Journalism, Nikolai Kondratiev, Paul Lévy, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, South Sea Bubble, statistical model, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, volatility smile, Yogi Berra

In running a hedge fund that’s leveraged twenty-five to one, expecting the future to be just like the past can be fatal. It is when we get away from investing and start considering those affected by financial markets that broader questions of market efficiency come into play. It’s not just whether one can beat the market, but whether one can rely on the prices prevailing on financial markets to be right. A popular concept in recent years has been the “wisdom of crowds”—the notion that groups can often make better-informed decisions than individuals. It’s a valid enough idea, and the title of an excellent book by James Surowiecki, but the wording is misleading. Crowds—and markets—possess many useful traits. Wisdom is not one of them. It is as Henri Poincaré wrote a century ago: When men are brought together, they no longer decide by chance and independently of each other, but react upon one another.


pages: 552 words: 168,518

MacroWikinomics: Rebooting Business and the World by Don Tapscott, Anthony D. Williams

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accounting loophole / creative accounting, airport security, Andrew Keen, augmented reality, Ayatollah Khomeini, barriers to entry, bioinformatics, Bretton Woods, business climate, business process, car-free, carbon footprint, citizen journalism, Clayton Christensen, clean water, Climategate, Climatic Research Unit, cloud computing, collaborative editing, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, corporate social responsibility, crowdsourcing, death of newspapers, demographic transition, distributed generation, don't be evil, en.wikipedia.org, energy security, energy transition, Exxon Valdez, failed state, fault tolerance, financial innovation, Galaxy Zoo, game design, global village, Google Earth, Hans Rosling, hive mind, Home mortgage interest deduction, interchangeable parts, Internet of things, invention of movable type, Isaac Newton, James Watt: steam engine, Jaron Lanier, jimmy wales, Joseph Schumpeter, Julian Assange, Kevin Kelly, knowledge economy, knowledge worker, Marshall McLuhan, medical bankruptcy, megacity, mortgage tax deduction, Netflix Prize, new economy, Nicholas Carr, oil shock, online collectivism, open borders, open economy, pattern recognition, peer-to-peer lending, personalized medicine, Ray Kurzweil, RFID, ride hailing / ride sharing, Ronald Reagan, scientific mainstream, shareholder value, Silicon Valley, Skype, smart grid, smart meter, social graph, social web, software patent, Steve Jobs, text mining, the scientific method, The Wisdom of Crowds, transaction costs, transfer pricing, University of East Anglia, urban sprawl, value at risk, WikiLeaks, X Prize, young professional, Zipcar

According to iCarpool’s founder, Lakshmi Krishnamurthy, the community support and feedback benefited iCarpool even more than the cash and the promotion: “The potential to tap into a fast growing diverse community of founders, funders, and technology and business experts—to be able to discuss ideas and exchange feedback—is amazing,” she says. “I believe community capital has a bright future. VenCorps is the American Idol for entrepreneurs.” By creating this virtual economy, an ad hoc meritocracy if you will, VenCorps harnesses its community of passionate participants, to leverage both the wisdom of crowds and the production capability of the masses. This duality is at the heart of wikinomics. The new collaboration is not just about the community picking the winners; it is also about the community building the winners together. Was the winner iCarpool.com the best choice? Did it have the best technology and solution? Did the community get it right? In some ways this is a moot point, at least from the perspective of the VC.


pages: 685 words: 203,949

The Organized Mind: Thinking Straight in the Age of Information Overload by Daniel J. Levitin

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airport security, Albert Einstein, Amazon Mechanical Turk, Anton Chekhov, big-box store, business process, call centre, Claude Shannon: information theory, cloud computing, cognitive bias, complexity theory, computer vision, conceptual framework, correlation does not imply causation, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, en.wikipedia.org, epigenetics, Eratosthenes, Exxon Valdez, framing effect, friendly fire, fundamental attribution error, Golden Gate Park, Google Glasses, haute cuisine, impulse control, index card, indoor plumbing, information retrieval, invention of writing, iterative process, jimmy wales, job satisfaction, Kickstarter, life extension, meta analysis, meta-analysis, more computing power than Apollo, Network effects, new economy, Nicholas Carr, optical character recognition, pattern recognition, phenotype, placebo effect, pre–internet, profit motive, randomized controlled trial, Skype, Snapchat, statistical model, Steve Jobs, supply-chain management, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Turing test, ultimatum game

Proceedings of the 24th IEEE Conference on Computer Vision and Pattern Recognition, 1793–1800. Wikipedia is an example of crowdsourcing Ayers, P., Matthews, C., & Yates, B. (2008). How Wikipedia works: And how you can be a part of it. San Francisco, CA: No Starch Press, p. 514. More than 4.5 million people Kickstarter, Inc. (2014). Seven things to know about Kickstarter. Retrieved from http://www.kickstarter.com the group average comes Surowiecki, J. (2005). The wisdom of crowds. New York, NY: Penguin. and, Treynor, J. L. (1987). Market efficiency and the bean jar experiment. Financial Analysts Journal, 43(3), 50–53. the cancer is now in remission Iaconesi, S. (2012). TED (Producer). (2013). Why I open-sourced cures to my cancer: Salvatore Iaconesi at TEDGlobal 2013 [Video file]. Available from http://blog.ted.com and, TEDMED. (2013, July 17). Salvatore Iaconesi at TEDMED 2013 [Video file].


pages: 677 words: 206,548

Future Crimes: Everything Is Connected, Everyone Is Vulnerable and What We Can Do About It by Marc Goodman

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23andMe, 3D printing, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, airport security, Albert Einstein, algorithmic trading, artificial general intelligence, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, Bill Joy: nanobots, bitcoin, Black Swan, blockchain, borderless world, Brian Krebs, business process, butterfly effect, call centre, Chelsea Manning, cloud computing, cognitive dissonance, computer vision, connected car, corporate governance, crowdsourcing, cryptocurrency, data acquisition, data is the new oil, Dean Kamen, disintermediation, don't be evil, double helix, Downton Abbey, Edward Snowden, Elon Musk, Erik Brynjolfsson, Filter Bubble, Firefox, Flash crash, future of work, game design, Google Chrome, Google Earth, Google Glasses, Gordon Gekko, high net worth, High speed trading, hive mind, Howard Rheingold, hypertext link, illegal immigration, impulse control, industrial robot, Internet of things, Jaron Lanier, Jeff Bezos, job automation, John Harrison: Longitude, Jony Ive, Julian Assange, Kevin Kelly, Khan Academy, Kickstarter, knowledge worker, Kuwabatake Sanjuro: assassination market, Law of Accelerating Returns, Lean Startup, license plate recognition, litecoin, M-Pesa, Mark Zuckerberg, Marshall McLuhan, Menlo Park, mobile money, more computing power than Apollo, move fast and break things, Nate Silver, national security letter, natural language processing, obamacare, Occupy movement, Oculus Rift, offshore financial centre, optical character recognition, pattern recognition, personalized medicine, Peter H. Diamandis: Planetary Resources, Peter Thiel, pre–internet, RAND corporation, ransomware, Ray Kurzweil, refrigerator car, RFID, ride hailing / ride sharing, Rodney Brooks, Satoshi Nakamoto, Second Machine Age, security theater, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, smart meter, Snapchat, social graph, software as a service, speech recognition, stealth mode startup, Stephen Hawking, Steve Jobs, Steve Wozniak, strong AI, Stuxnet, supply-chain management, technological singularity, telepresence, telepresence robot, Tesla Model S, The Wisdom of Crowds, Tim Cook: Apple, trade route, uranium enrichment, Wall-E, Watson beat the top human players on Jeopardy!, Wave and Pay, We are Anonymous. We are Legion, web application, WikiLeaks, Y Combinator, zero day

The news of the prize was unveiled in a dark corner of the digital underground in a professionally produced video that featured several glamorous female “assistants” on the floor of the dealer’s showroom. The boss’s gamification strategy paid off and received widespread attention among his workers, with the Ferrari reserved for the chosen “employee of the month.” From Crowdsourcing to Crime Sourcing Of all the business innovation techniques utilized by Crime, Inc., perhaps none has been as widely adopted as crowdsourcing. Crowdsourcing began as a legitimate tool to leverage the wisdom of crowds to solve complex business and scientific challenges. The concept of crowdsourcing first gained widespread attention in an article written in 2006 by Jeff Howe for Wired. Howe defined crowdsourcing as the act of “outsourcing a task to a large, undefined group of people through an open call.” While hundreds of examples of crowdsourcing have been documented with great results, these very same techniques can be harnessed for criminal purposes as well.


pages: 798 words: 240,182

The Transhumanist Reader by Max More, Natasha Vita-More

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23andMe, Any sufficiently advanced technology is indistinguishable from magic, artificial general intelligence, augmented reality, Bill Joy: nanobots, bioinformatics, brain emulation, Buckminster Fuller, cellular automata, clean water, cloud computing, cognitive bias, cognitive dissonance, combinatorial explosion, conceptual framework, Conway's Game of Life, cosmological principle, data acquisition, discovery of DNA, Drosophila, en.wikipedia.org, experimental subject, Extropian, fault tolerance, Flynn Effect, Francis Fukuyama: the end of history, Frank Gehry, friendly AI, game design, germ theory of disease, hypertext link, impulse control, index fund, John von Neumann, joint-stock company, Kevin Kelly, Law of Accelerating Returns, life extension, Louis Pasteur, Menlo Park, meta analysis, meta-analysis, moral hazard, Network effects, Norbert Wiener, P = NP, pattern recognition, phenotype, positional goods, prediction markets, presumed consent, Ray Kurzweil, reversible computing, RFID, Richard Feynman, Ronald Reagan, silicon-based life, Singularitarianism, stem cell, stochastic process, superintelligent machines, supply-chain management, supply-chain management software, technological singularity, Ted Nelson, telepresence, telepresence robot, telerobotics, the built environment, The Coming Technological Singularity, the scientific method, The Wisdom of Crowds, transaction costs, Turing machine, Turing test, Upton Sinclair, Vernor Vinge, Von Neumann architecture, Whole Earth Review, women in the workforce

The essays in this section show how better tools and perspectives can improve our ­decision-making – a crucial task in a world where technology becomes ever more potent, for better or worse. This section includes three domains of thought that explore thinking processes and issues through the lenses of ­economics, applied philosophy, and electronic hyperlink theory. Robin Hanson’s “Idea Futures” was an early explication of a mechanism that has since come to be known as “decision markets.” These markets harness the “wisdom of crowds” to improve decision-making and forecasting accuracy. Subsequent work has shown how decision markets typically yield results more accurate than those from the best experts in areas as diverse as ­predicting sales of printer supplies and box-office take for movies in their first days of release. Max More’s Proactionary Principle was designed as a replacement for the precautionary ­principle – an overly simple and biased rule for making decisions in the presence of significant risk, especially in the context of technological and environment issues.


pages: 834 words: 180,700

The Architecture of Open Source Applications by Amy Brown, Greg Wilson

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8-hour work day, anti-pattern, bioinformatics, c2.com, cloud computing, collaborative editing, combinatorial explosion, computer vision, continuous integration, create, read, update, delete, Debian, domain-specific language, en.wikipedia.org, fault tolerance, finite state, Firefox, friendly fire, linked data, load shedding, locality of reference, loose coupling, Mars Rover, MVC pattern, premature optimization, recommendation engine, revision control, side project, Skype, slashdot, social web, speech recognition, the scientific method, The Wisdom of Crowds, web application, WebSocket

This has been costly, but the reward is the growth of the Eclipse community because of the trust established that consumers can continue to ship products based on a stable API. Eclipse has so many consumers with diverse use cases and our expansive API became difficult for new consumers to adopt and understand. In retrospect, we should have kept our API simpler. If 80% of consumers only use 20% of the API, there is a need for simplification which was one of the reasons that the Eclipse 4.x stream was created. The wisdom of crowds does reveal interesting use cases, such as disaggregating the IDE into bundles that could be used to construct RCP applications. Conversely, crowds often generate a lot of noise with requests for edge case scenarios that take a significant amount of time to implement. In the early days of the Eclipse project, committers had the luxury of dedicating significant amounts of time to documentation, examples and answering community questions.


pages: 669 words: 210,153

Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers by Timothy Ferriss

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Airbnb, artificial general intelligence, asset allocation, Atul Gawande, augmented reality, back-to-the-land, Bernie Madoff, Bertrand Russell: In Praise of Idleness, Black Swan, blue-collar work, Buckminster Fuller, business process, Cal Newport, call centre, Checklist Manifesto, cognitive bias, cognitive dissonance, Colonization of Mars, Columbine, correlation does not imply causation, David Brooks, David Graeber, diversification, diversified portfolio, Donald Trump, effective altruism, Elon Musk, fault tolerance, fear of failure, Firefox, follow your passion, future of work, Google X / Alphabet X, Howard Zinn, Hugh Fearnley-Whittingstall, Jeff Bezos, job satisfaction, Johann Wolfgang von Goethe, Kevin Kelly, Kickstarter, Lao Tzu, life extension, Mahatma Gandhi, Mark Zuckerberg, Mason jar, Menlo Park, Mikhail Gorbachev, Nicholas Carr, optical character recognition, PageRank, passive income, pattern recognition, Paul Graham, Peter H. Diamandis: Planetary Resources, Peter Singer: altruism, Peter Thiel, phenotype, post scarcity, premature optimization, QWERTY keyboard, Ralph Waldo Emerson, Ray Kurzweil, recommendation engine, rent-seeking, Richard Feynman, Richard Feynman, risk tolerance, Ronald Reagan, sharing economy, side project, Silicon Valley, skunkworks, Skype, Snapchat, social graph, software as a service, software is eating the world, stem cell, Stephen Hawking, Steve Jobs, Stewart Brand, superintelligent machines, Tesla Model S, The Wisdom of Crowds, Thomas L Friedman, Wall-E, Washington Consensus, Whole Earth Catalog, Y Combinator

Frankl), The Fourth Turning; Generations (William Strauss), Slow Sex (Nicole Daedone), Mindset (Carol Dweck) Rodriguez, Robert: Start with Why: How Great Leaders Inspire Everyone to Take Action (Simon Sinek) Rogen, Seth: Watchmen (Alan Moore), Preacher (Garth Ennis), The Hitchhiker’s Guide to the Galaxy (Douglas Adams), The Art of Dramatic Writing (Lajos Egri), The Conquest of Happiness (Bertrand Russell) Rose, Kevin: The Miracle of Mindfulness: An Introduction to the Practice of Meditation (Thich Nhat Hanh), The Wisdom of Crowds (James Surowiecki) Rowe, Mike: The Deep Blue Good-by; Pale Gray for Guilt, Bright Orange for the Shroud; The Lonely Silver Rain, Nightmare in Pink; A Tan and Sandy Silence; Cinnamon Skin (John D. MacDonald), At Home: A Short History of Private Life; The Lost Continent: Travels in Small-Town America (Bill Bryson), A Curious Discovery: An Entrepreneur’s Story (John Hendricks) Rubin, Rick: Tao Te Ching (Lao Tzu, translation by Stephen Mitchell), Wherever You Go, There You Are (Jon Kabat-Zinn) Sacca, Chris: Not Fade Away: A Short Life Well Lived (Laurence Shames and Peter Barton), The Essential Scratch & Sniff Guide to Becoming a Whiskey Know-It-All; The Essential Scratch & Sniff Guide to Becoming a Wine Expert (Richard Betts), How to Get Filthy Rich in Rising Asia: A Novel (Mohsin Hamid), I Seem to Be a Verb (R.


pages: 743 words: 201,651

Free Speech: Ten Principles for a Connected World by Timothy Garton Ash

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A Declaration of the Independence of Cyberspace, Affordable Care Act / Obamacare, Andrew Keen, Apple II, Ayatollah Khomeini, battle of ideas, Berlin Wall, bitcoin, British Empire, Cass Sunstein, Chelsea Manning, citizen journalism, Clapham omnibus, colonial rule, crowdsourcing, David Attenborough, don't be evil, Edward Snowden, Etonian, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, Ferguson, Missouri, Filter Bubble, financial independence, Firefox, Galaxy Zoo, global village, index card, Internet Archive, invention of movable type, invention of writing, Jaron Lanier, jimmy wales, Julian Assange, Mark Zuckerberg, Marshall McLuhan, megacity, mutually assured destruction, national security letter, Netflix Prize, Nicholas Carr, obamacare, Peace of Westphalia, Peter Thiel, pre–internet, profit motive, RAND corporation, Ray Kurzweil, Ronald Reagan, semantic web, Silicon Valley, Simon Singh, Snapchat, social graph, Stephen Hawking, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Wisdom of Crowds, Turing test, We are Anonymous. We are Legion, WikiLeaks, World Values Survey, Yom Kippur War

‘Each of them by himself may not be of a good quality; but when they all come together it is possible that they may surpass—collectively and as a body, although not individually—the quality of the few best . . . For when there are many, each has his share of goodness and practical wisdom’.182 The legal philosopher Jeremy Waldron calls this the ‘doctrine of the wisdom of the many’.183 Twenty-five hundred years ago, that was the original ‘crowdsourcing’. The internet offers us opportunities to create our own self-governing online communities and draw on the ‘wisdom of crowds’ across frontiers. Within the technical, legal and political outer limits set by the big cats and dogs, we can establish communities where we say: ‘we wish to conduct this debate by certain rules. If you don’t want to live by those rules, go somewhere else’. In the best case, what in the online world are usually called ‘community standards’ are exactly that—the self-determined standards of a self-governing community.


pages: 898 words: 266,274

The Irrational Bundle by Dan Ariely

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accounting loophole / creative accounting, air freight, Albert Einstein, banking crisis, Bernie Madoff, Black Swan, Broken windows theory, Burning Man, business process, cashless society, Cass Sunstein, clean water, cognitive dissonance, computer vision, corporate governance, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, fudge factor, George Akerlof, Gordon Gekko, greed is good, happiness index / gross national happiness, Jean Tirole, job satisfaction, knowledge economy, knowledge worker, lake wobegon effect, late fees, loss aversion, Murray Gell-Mann, new economy, Peter Singer: altruism, placebo effect, price anchoring, Richard Feynman, Richard Feynman, Richard Thaler, Saturday Night Live, Schrödinger's Cat, second-price auction, shareholder value, Silicon Valley, Skype, software as a service, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, ultimatum game, Upton Sinclair, Walter Mischel, young professional

Ariely unmasks the subtle but powerful tricks that our minds play on us, and shows us how we can prevent being fooled.” —Jerome Groopman, New York Times bestselling author of How Doctors Think “Dan Ariely is a genius at understanding human behavior: no economist does a better job of uncovering and explaining the hidden reasons for the weird ways we act, in the marketplace and out. Predictably Irrational will reshape the way you see the world, and yourself, for good.” —James Surowiecki, author of The Wisdom of Crowds “Predictably Irrational is a charmer—filled with clever experiments, engaging ideas, and delightful anecdotes. Dan Ariely is a wise and amusing guide to the foibles, errors, and bloopers of everyday decision-making.” —Daniel Gilbert, Professor of Psychology, Harvard University, and author of Stumbling on Happiness “Predictably Irrational is going to be the most influential, talked-about book in years.