The Wisdom of Crowds

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pages: 475 words: 134,707

The Hype Machine: How Social Media Disrupts Our Elections, Our Economy, and Our Health--And How We Must Adapt by Sinan Aral

Airbnb, Albert Einstein, Any sufficiently advanced technology is indistinguishable from magic, augmented reality, Bernie Sanders, bitcoin, carbon footprint, Cass Sunstein, computer vision, coronavirus, correlation does not imply causation, COVID-19, Covid-19, crowdsourcing, cryptocurrency, death of newspapers, disintermediation, Donald Trump, Drosophila, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, experimental subject, facts on the ground, Filter Bubble, global pandemic, hive mind, illegal immigration, income inequality, Kickstarter, knowledge worker, longitudinal study, low skilled workers, Lyft, Mahatma Gandhi, Mark Zuckerberg, Menlo Park, meta analysis, meta-analysis, Metcalfe’s law, mobile money, move fast and break things, move fast and break things, multi-sided market, Nate Silver, natural language processing, Network effects, performance metric, phenotype, recommendation engine, Robert Bork, Robert Shiller, Robert Shiller, Second Machine Age, sentiment analysis, shareholder value, skunkworks, Snapchat, social graph, social intelligence, social software, social web, statistical model, stem cell, Stephen Hawking, Steve Jobs, Telecommunications Act of 1996, The Chicago School, The Wisdom of Crowds, theory of mind, Tim Cook: Apple, Uber and Lyft, uber lyft, WikiLeaks, Yogi Berra

In so doing, I’ll look under the hood at the mechanics of the Hype Machine, dig into the science of online peer effects, and explore how our new radical interdependence is changing the products we buy, the people we vote for, and even who we meet and fall in love with. After looking under the hood, I’ll zoom out to consider the societal implications of the Hype Machine and the three trends it perpetuates—for example, its implications for what’s known as the “wisdom of crowds.” Our ability to harness the wisdom of crowds and collective intelligence rests on three basic pillars: independence, diversity, and equality. The problem is that the Hype Machine erodes all three of these pillars and turns wisdom into madness. I’ll discuss how we can recapture the wisdom of crowds in Chapter 10. Next, I’ll remind us why we invented the Hype Machine in the first place by describing its positive potential in creating an incredible tsunami of productivity, innovation, social welfare, democratization, equality, caring, positivity, unity, and social progress.

In the decade that followed, the Hype Machine systematically undercut the three fundamental assumptions of the wisdom of crowds. Crowd wisdom depends on having many diverse, independent opinions of equal voice. But as we know, the Hype Machine hypersocializes us, making our individual judgments systematically and algorithmically interdependent; polarizes us into homogeneous communities, like birds of a feather flocking together; and entrenches us in an unequal communication system that perpetuates the popularity of the popular and accelerates the creation of trends, in what is essentially an automated herding market, where people follow the behavior of others. As a result, we’re trending away from Surowiecki’s vision of the wisdom of crowds, toward what his intellectual foil, Charles MacKay, called “the madness of crowds.”

These design choices baked bias into the Hype Machine’s code, pushing Google users to search for flu-related terms more than they would have without the algorithmic nudges. These new suggestions resulted in more flu searches, leading GFT to think there was more flu than actually existed. It’s a dramatic example of how software code determines the Hype Machine’s impact. Small algorithm changes helped turn a leading example of the wisdom of crowds into madness by overturning one of the three pillars on which the wisdom of crowds rests—by injecting interdependence into what were previously independent opinions. Wise crowds, the theory goes, typically require three things: independence, diversity, and equality. The problem is that the Hype Machine undermines all of them. Independence Crowds predict accurately because they cancel out individuals’ errors. Recall Francis Galton’s crowd guessing the ox’s weight.


pages: 256 words: 60,620

Think Twice: Harnessing the Power of Counterintuition by Michael J. Mauboussin

affirmative action, asset allocation, Atul Gawande, availability heuristic, Benoit Mandelbrot, Bernie Madoff, Black Swan, butter production in bangladesh, Cass Sunstein, choice architecture, Clayton Christensen, cognitive dissonance, collateralized debt obligation, Daniel Kahneman / Amos Tversky, deliberate practice, disruptive innovation, Edward Thorp, experimental economics, financial innovation, framing effect, fundamental attribution error, Geoffrey West, Santa Fe Institute, George Akerlof, hindsight bias, hiring and firing, information asymmetry, libertarian paternalism, Long Term Capital Management, loose coupling, loss aversion, mandelbrot fractal, Menlo Park, meta analysis, meta-analysis, money market fund, Murray Gell-Mann, Netflix Prize, pattern recognition, Philip Mirowski, placebo effect, Ponzi scheme, prediction markets, presumed consent, Richard Thaler, Robert Shiller, Robert Shiller, statistical model, Steven Pinker, The Wisdom of Crowds, ultimatum game

When you face a decision, ask yourself whether you would rather get your next recommendation from Cinematch or the guy behind the videostore counter. You now know where you are most likely to get the most viewing pleasure. What Jelly Beans Reveal About the Wisdom of the Crowd The Best Buy example, where a collection of partially informed nonexperts did better than experts, shows our second decision mistake: relying on experts instead of the wisdom of crowds. Understanding why collectives are often wise—and sometimes very unwise—requires us to look under the hood at how the wisdom of crowds works. But before proceeding, give the question some thought. How is it that a group of nonexperts can predict better than the resident expert? Scott Page, a social scientist who has studied problem solving by groups, offers a very useful approach for understanding collective decision making. He calls it the diversity prediction theorem, which states:18 Collective error = average individual error − prediction diversity The theorem uses squared errors as an accuracy measure, which researchers in the social sciences and statistics commonly employ because it assures that negative and positive errors do not cancel out.19 The average individual error captures the accuracy of the individual guesses.

Also, incentives may encourage certain choices that are good for one person but not another. • Chapter 3, “The Expert Squeeze: Why Netflix Knows More Than Clerks Do About Your Favorite Films,” highlights our uncritical reliance on experts. Experts tend to know about very narrow fields, justifying a skeptical view of the claims and predictions they make. Increasingly, people can more effectively solve problems by making models of decisions using computers or by accessing the wisdom of crowds than by relying on experts. • Chapter 4, “Situational Awareness: How Accordion Music Boosts Sales of Burgundy,” underscores the crucial role of context in decision making. As much as we like to think of ourselves as objective, the behavior of those around us exerts extraordinary influence on our decisions. It also shows why we should not be too quick to judge the behavior of others without fully appreciating the context of their decisions

The stakes are especially high for consumer electronics firms because they generate so much of their revenue during the gift-giving season and the value of their inventory depreciates rapidly. The pressure is really on the internal experts at consumer-electronics giant Best Buy, one of a multitude of retailers that rely on specialists. So you can imagine the reaction when James Surowiecki, author of the best-selling book The Wisdom of Crowds, strolled into Best Buy’s headquarters and delivered a startling message: a relatively uninformed crowd could predict better than the firm’s best seers.1 Surowiecki’s message resonated with Jeff Severts, an executive then running Best Buy’s gift-card business. Severts wondered whether the idea would really work in a corporate setting, so he gave a few hundred people in the organization some basic background information and asked them to forecast February 2005 gift-card sales.


pages: 326 words: 106,053

The Wisdom of Crowds by James Surowiecki

AltaVista, Andrei Shleifer, asset allocation, Cass Sunstein, coronavirus, 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, John Meriwether, Joseph Schumpeter, knowledge economy, lone genius, Long Term Capital Management, market bubble, market clearing, market design, Monkeys Reject Unequal Pay, moral hazard, Myron Scholes, new economy, offshore financial centre, Picturephone, prediction markets, profit maximization, 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, zero-sum game

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


pages: 733 words: 179,391

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

"Robert Solow", Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Berlin Wall, Bernie Madoff, bitcoin, Bonfire of the Vanities, bonus culture, break the buck, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, Diane Coyle, diversification, diversified portfolio, double helix, easy for humans, difficult for computers, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, interest rate derivative, invention of the telegraph, Isaac Newton, James Watt: steam engine, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, merger arbitrage, meta analysis, meta-analysis, Milgram experiment, money market fund, moral hazard, Myron Scholes, Nick Leeson, old-boy network, out of africa, p-value, paper trading, passive investing, Paul Lévy, Paul Samuelson, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Shiller, Sam Peltzman, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, survivorship bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

How we choose to deploy these powerful technologies makes all the difference, in the financial world just as in nuclear physics. That’s why we need the Adaptive Markets Hypothesis. We need a new narrative to make sense of the wisdom of crowds, the madness of mobs, and evolution at the speed of thought. Our search for this new narrative begins with a terrible catastrophe. If markets truly reflect the wisdom of crowds, the market reaction to this catastrophe will illustrate just how wise crowds can be. CHAPTER 1 Are We All Homo economicus Now? TRAGEDY AND THE WISDOM OF CROWDS At 11:39 a.m. on Tuesday, January 28, 1986, the Space Shuttle Challenger took off from the Kennedy Space Center at Cape Canaveral. Seventythree seconds into its flight Challenger exploded. Millions of people around the world were watching live on television, many of them kids drawn by the presence of schoolteacher Christa McAuliffe, the Shuttle’s first civilian passenger.

It implies that investing in stocks in the long run may not always be a good idea, especially if your savings can be wiped out in the short run. And it implies that changing business conditions and adaptive responses are often more important drivers of investor behavior and Introduction • 3 market dynamics than enlightened self-interest—the wisdom of crowds is sometimes overwhelmed by the madness of mobs. This isn’t to say that rational economics is of no value; on the contrary, financial economics is still among the most highly sought-after fields of expertise on Wall Street (especially if the starting salaries of finance Ph.D.s are any indication). The madness of mobs eventually subsides and is replaced by the wisdom of crowds—at least until the next shock disrupts the status quo. From the adaptive markets perspective, the Efficient Markets Hypothesis isn’t wrong—it’s just incomplete. It’s like the parable of the five blind monks who encounter an elephant for the very first time.

Moreover, the market was able to accomplish this without its buyers and sellers having any special technical expertise about aerospace disasters. A catastrophic explosion might suggest a failure in the fuel tanks, made by Morton Thiokol, which turned out to be the case. James Surowiecki, the business columnist for The New Yorker, called this an example of the wisdom of crowds.8 If the Efficient Markets Hypothesis is true—and the Challenger example certainly implies it is—the wisdom of crowds has enormously far-reaching consequences. A RANDOM WALK THROUGH HISTORY Markets are mysterious things to the layperson, and this is nothing new. People have been trying to understand the behavior of markets for hundreds if not thousands of years. Our first records of money are at least four thousand years old, and although it’s impossible to say, schemes to beat the market were probably invented shortly thereafter.


pages: 266 words: 87,411

The Slow Fix: Solve Problems, Work Smarter, and Live Better in a World Addicted to Speed by Carl Honore

Albert Einstein, Atul Gawande, Broken windows theory, call centre, Checklist Manifesto, clean water, clockwatching, cloud computing, crowdsourcing, Dava Sobel, delayed gratification, drone strike, Enrique Peñalosa, Erik Brynjolfsson, Ernest Rutherford, Exxon Valdez, fundamental attribution error, game design, income inequality, index card, invention of the printing press, invisible hand, Isaac Newton, Jeff Bezos, John Harrison: Longitude, lateral thinking, lone genius, medical malpractice, microcredit, Netflix Prize, planetary scale, Ralph Waldo Emerson, RAND corporation, shareholder value, Silicon Valley, Skype, stem cell, Steve Jobs, Steve Wozniak, the scientific method, The Wisdom of Crowds, ultimatum game, urban renewal, War on Poverty

Isaac Kohane quote: Jonah Lehrer, “Groupthink: The Brainstorming Myth,” New Yorker, 30 January 2012. Chapter 9 – Crowdsource: The Wisdom of the Masses Wutbürger as German word of the year: Full list available from German Language Society at http://www.gfds.de/aktionen/wort-des-jahres/ Guessing the weight of an ox: James Surowiecki, The Wisdom of Crowds (New York: Random, 2005), pp. xii-xiii. Pinpointing vessel lost at sea: Surowiecki, The Wisdom of Crowds, pp. xx-xxi. Public identifies Mars craters: Surowiecki, The Wisdom of Crowds, p. 276. Diversity Trumps Ability Theorem: Based on my interview with Scott Page. John Harrison: For the whole story check out Dava Sobel, Longitude: The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of His Time (London: Fourth Estate, 1998). Teenager invents method for detecting pancreatic cancer: Jake Andraka won first place at the 2012 Intel International Science and Engineering Fair (Intel ISEF), a program of the Society for Science and the Public.

Chapter 2 – Confess: The Magic of Mistakes and the Mea Culpa Typical air accident seven errors: From “A Review of Flightcrew-Involved Major Accidents of US Air Carriers, 1978 Through 1990,” a Safety Study published in 1994 by the US National Transportation Safety Board. Nearly half of financial services firms do not rescue floundering projects: From a 2011 report by the Economist Intelligence Unit entitled “Proactive response – How mature financial services firms deal with troubled projects.” Climbing corporate ladder by concealing bad news: James Surowiecki, The Wisdom of Crowds (New York: Anchor, 2004), p. 205. Four of every five products perish in first year: James Surowiecki, The Wisdom of Crowds (New York: Anchor, 2004), p. 218. Domino’s television commercials: Full details of the campaign available at http://www.pizzaturnaround.com/. Fedex apologizes: Blog post and video apology at http://blog.fedex.designcdt.com/absolutely-positively-unacceptable Soothing effect of apology: M.C. Whited, A.L. Wheat et al, “The Influence of Forgiveness and Apology on Cardiovascular Reactivity and Recovery in Response to Mental Stress,” Journal of Behavioral Medicine, Volume 33, Number 4 (August 2010), pp. 293–304.

Chapter 11 – Devolve: Self-Help (in a Good Way) Starbucks’ Schultz accuses speculators: Debarati Roy, “Coffee Speculation Inflates Price, Hurts Demand, Starbucks Says,” Bloomberg, 18 March 2011. Demes solved local problems in Ancient Greece: James Surowiecki, The Wisdom of Crowds (New York: Random, 2005), p. 71. Subsidiarity and Catholicism: Don Fier, “The Principle of Subsidiarity and the ‘Welfare State’,” at CatholicCulture.org. Staff-owned companies more resilient and productive: From “Model Growth: Do Employee-Owned Businesses Deliver Sustainable Performance?” a 2010 report by Cass Business School for John Lewis Group. Research showing people work better when they feel ownership: Surowiecki, The Wisdom of Crowds, p. 210. Nurses at Georgetown University Hospital: V. Dion Haynes, “What Nurses Want,” Washington Post, 13 September 2008. Empowering staff at SAS: From Jan Carlzan, Moments of Truth, New Strategies for Today’s Customer-Driven Economy (New York: Harper & Row, 1989).


ucd-csi-2011-02 by Unknown

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

affirmative action, bioinformatics, business cycle, 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.


pages: 344 words: 104,077

Superminds: The Surprising Power of People and Computers Thinking Together by Thomas W. Malone

agricultural Revolution, Airbnb, Albert Einstein, Amazon Mechanical Turk, Apple's 1984 Super Bowl advert, Asperger Syndrome, Baxter: Rethink Robotics, bitcoin, blockchain, business process, call centre, clean water, creative destruction, crowdsourcing, Donald Trump, Douglas Engelbart, Douglas Engelbart, drone strike, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, experimental economics, Exxon Valdez, future of work, Galaxy Zoo, gig economy, happiness index / gross national happiness, industrial robot, Internet of things, invention of the telegraph, inventory management, invisible hand, Jeff Rulifson, jimmy wales, job automation, John Markoff, Joi Ito, Joseph Schumpeter, Kenneth Arrow, knowledge worker, longitudinal study, Lyft, Marshall McLuhan, Occupy movement, Pareto efficiency, pattern recognition, prediction markets, price mechanism, Ray Kurzweil, Rodney Brooks, Ronald Coase, Second Machine Age, self-driving car, Silicon Valley, slashdot, social intelligence, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, technological singularity, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Tim Cook: Apple, transaction costs, Travis Kalanick, Uber for X, uber lyft, Vernor Vinge, Vilfredo Pareto, Watson beat the top human players on Jeopardy!

By cleverly motivating everyone to not only look for balloons but also recruit others to the cause, this approach rapidly recruited a vast army of searchers. Together this group’s brute-force searching solved the problem far faster than almost anyone expected. I can’t imagine that this method would have been possible without the fast, cheap communication enabled by modern information technologies. THE WISDOM-OF-CROWDS EFFECT In his book The Wisdom of Crowds, James Surowiecki popularized another reason why large groups can be smarter than small ones.9 He tells the story of the English statistician Sir Francis Galton, who, at a county fair in England in 1906, analyzed the results of a contest to guess the weight of an ox. It turned out that the average of all the guesses (1,197 pounds) was a remarkably accurate estimate of the actual weight (1,198 pounds).

The basic principle behind why this works is that when many people with no particular bias guess the answer, they should be equally likely to make errors on the high side and on the low side of the correct answer. When you average their answers, the errors should cancel each other out, leaving an accurate estimate. Usually, the larger the crowd, the more accurate the estimate.10 Limitations of the Wisdom of Crowds Even though many people know about the wisdom-of-crowds effect, it turns out that this effect is more complicated than many readers of Surowiecki’s book realize. First, the average is probably not the right statistic to use. I’ve been doing a version of this experiment in my MIT classes for years, asking students to guess how many jelly beans are in a jar. Contrary to what you would expect from reading Surowiecki’s book, the average of their answers is often quite far from the correct answer—20–40 percent of the class members often make guesses that are more accurate than the average.

James Surowiecki, The Wisdom of Crowds (New York: Doubleday, 2004). 10. Andrew J. King and Guy Cowlishaw, “When to Use Social Information: The Advantage of Large Group Size in Individual Decision Making,” Biology Letters 3, no. 2 (2007): 137–39, http://rsbl.royalsocietypublishing.org/content/3/2/137?ijkey=f4eb55e0f4b8eda962eb8f930301e30d9eeda600&keytype2=tf_ipsecsha, doi:0.1098/rsbl.2007.0017; Albert Kao and Iain D. Couzin, “Decision Accuracy in Complex Environments Is Often Maximized by Small Group Sizes,” Proceedings of the Royal Society B 281, no. 1,784 (2014): 20133305, http://rspb.royalsocietypublishing.org/content/281/1784/20133305.full#ref-list-1. 11. Jan Lorenz, Heiko Rauhut, Frank Schweitzer, and Dirk Helbing, “How Social Influence Can Undermine the Wisdom of Crowd Effect,” Proceedings of the National Academy of Sciences 108, no. 22 (2011): 9,020–25, http://www.pnas.org/content/108/22/9020.full.pdf, doi:10.1073/pnas.1008636108; Erik B.


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

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, information asymmetry, 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: 478 words: 126,416

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

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, buy and hold, 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, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, 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, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, 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, 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: 313 words: 91,098

The Knowledge Illusion by Steven Sloman

Affordable Care Act / Obamacare, Air France Flight 447, attribution theory, bitcoin, Black Swan, Cass Sunstein, combinatorial explosion, computer age, crowdsourcing, Dmitri Mendeleev, Elon Musk, Ethereum, Flynn Effect, Hernando de Soto, hindsight bias, hive mind, indoor plumbing, Isaac Newton, John von Neumann, libertarian paternalism, Mahatma Gandhi, Mark Zuckerberg, meta analysis, meta-analysis, obamacare, prediction markets, randomized controlled trial, Ray Kurzweil, Richard Feynman, Richard Thaler, Rodney Brooks, Rosa Parks, single-payer health, speech recognition, stem cell, Stephen Hawking, Steve Jobs, technological singularity, The Coming Technological Singularity, The Wisdom of Crowds, Vernor Vinge, web application, Whole Earth Review, Y Combinator

MIT Sloan Management Review 50(2): 45–52. Amazon ratings are not all they’re cracked up to be: B. De Langhe, P. M. Fernbach, and D. R. Lichtenstein (2015). “Navigating by the Stars: Investigating the Actual and Perceived Validity of Online User Ratings.” Journal of Consumer Research 42: 817–830. The Wisdom of Crowds: F. Galton (1907). Vox Populi (the Wisdom of Crowds). First published in Nature 75(1949): 450–451. The topic is discussed in detail in J. Surowiecki (2005). The Wisdom of Crowds. New York: Doubleday Anchor. within 1 percent of the ox’s true weight of 1,198 pounds: Despite frequent reports saying otherwise, he did not find that the mean weight was within 1 pound of the ox’s true weight. Nor did he find that the average was better than any individual guess. prediction market: K.

Their ratings do not correlate very well with the evaluations of true experts and are too high for beloved brands and high-priced items. Many consumers just do not have the expertise to accurately assess the quality of technical products like digital cameras and kitchen appliances. But crowdsourcing can be effective. This was first revealed by Francis Galton in 1907 in a paper entitled Vox Populi (The Wisdom of Crowds). He reports on a contest held at a farmers’ fair in Plymouth, England, to guess the weight of a fat ox. The contest was open to everyone willing to pay a small fee with the hope of making a guess close enough to the ox’s true weight to win a prize. Guesses came from experts like butchers and farmers as well as the general public. As Galton says, “The average competitor was probably as well fitted for making a just estimate of the dressed weight of the ox, as an average voter is of judging the merits of most political issues on which he votes, and the variety among the voters to judge justly was probably much the same in either case.”

But the example demonstrates that direct democracy is vulnerable to manipulation just like other forms of governance. There are a lot of reasons to be critical of ballot measures voted on directly by citizenry. Our main concern is that such measures neglect the knowledge illusion. Individual citizens rarely know enough to make an informed decision about complex social policy even if they think they do. Giving a vote to every citizen can swamp the contribution of expertise to good judgment that the wisdom of crowds relies on. Reducing taxes sounds good in the abstract, but consider California’s Proposition 13. This ballot measure, passed by a direct vote of the people of California in 1978, was designed to limit taxes on residential, business, and agricultural property, reducing them from an average of 3 percent to a cap of 1 percent of a property’s sale value. It also prevented increases in property taxes of more than 2 percent per year.


pages: 400 words: 94,847

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

Albert Einstein, augmented reality, barriers to entry, bioinformatics, Cass Sunstein, Climategate, Climatic Research Unit, conceptual framework, dark matter, discovery of DNA, Donald Knuth, double helix, Douglas Engelbart, 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, Johannes Kepler, Kevin Kelly, Magellanic Cloud, means of production, medical residency, Nicholas Carr, P = NP, publish or perish, Richard Feynman, Richard Stallman, selection bias, semantic web, Silicon Valley, Silicon Valley startup, Simon Singh, Skype, slashdot, social intelligence, 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

Albert Einstein, algorithmic trading, Amazon Mechanical Turk, Apple's 1984 Super Bowl advert, backtesting, Black Swan, book scanning, bounce rate, business intelligence, business process, butter production in bangladesh, call centre, Charles Lindbergh, commoditize, computer age, conceptual framework, correlation does not imply causation, crowdsourcing, dark matter, data is the new oil, en.wikipedia.org, Erik Brynjolfsson, Everything should be made as simple as possible, experimental subject, Google Glasses, happiness index / gross national happiness, job satisfaction, Johann Wolfgang von Goethe, lifelogging, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, mass immigration, 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, Shai Danziger, 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, Thomas Bayes, Thomas Davenport, Turing test, Watson beat the top human players on Jeopardy!, X Prize, Yogi Berra, zero-sum game

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: 354 words: 105,322

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"Robert Solow", Affordable Care Act / Obamacare, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Swan, blockchain, Bonfire of the Vanities, Bretton Woods, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, Paul Samuelson, Peace of Westphalia, Pierre-Simon Laplace, plutocrats, Plutocrats, prediction markets, price anchoring, price stability, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk-adjusted returns, Ronald Reagan, Silicon Valley, sovereign wealth fund, special drawing rights, stocks for the long run, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, Westphalian system

The reason the market was so certain Remain would win is a fascinating case study in the misapprehension of behavioral science. Polls leading up to the vote showed the race was too close to call. However, betting markets run by Ladbrokes and Betfair showed a 70 percent probability that Remain would win. A certain type of foreign exchange market participant, the young London City banker who makes markets for his firm and clients, considered betting odds a distillation of the “wisdom of crowds” and priced sterling to reflect that ostensible wisdom. The wisdom of crowds concept was popularized in a 2004 book by that title written by James Surowiecki. The book included an overview of published behavioral research on the subject. The classic example involved guessing the number of jellybeans in a large jar. In a typical experiment, an average of mere guesses by a large number of everyday observers proved more accurate than the estimate of a single expert who might try to calculate the jar’s volume divided by the estimated volume of one jellybean with allowance for the irregular space between beans.

As recently as the month before revaluation: Press release, “Swiss National Bank Introduces Negative Interest Rates,” Swiss National Bank, December 18, 2014, accessed August 9, 2016, www.snb.ch/en/mmr/reference/pre_20141218/source/pre_20141218.en.pdf. One prominent foreign exchange market participant: Peter Spence, “Swiss Franc Surges After Scrapping Euro Ceiling,” The Telegraph, January 15, 2015, accessed August 9, 2016, www.telegraph.co.uk/finance/currency/11347218/Swiss-franc-surges-after-scrapping-euro-peg.html. The wisdom of crowds concept: See James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economics, Societies, and Nations (New York: Anchor Books, 2005). This move was followed by an IMF study: “Staff Note for the G20: The Role of the SDR—Initial Considerations,” International Monetary Fund, July 15, 2016, accessed August 9, 2016, www.imf.org/external/np/pp/eng/2016/072416.pdf.

In a typical experiment, an average of mere guesses by a large number of everyday observers proved more accurate than the estimate of a single expert who might try to calculate the jar’s volume divided by the estimated volume of one jellybean with allowance for the irregular space between beans. In the crowd’s estimate, extreme guesses (“one” or “a million”) cancel out and the average of the remaining guesses is quite close to the actual number. Hence, the wisdom of crowds. Based on a naïve understanding of this science, the City bankers decided the everyman nature of betting markets produces a better forecast than the “expert” pollsters. Flaws in the London bankers’ logic are legion. Accuracy of betting odds in predicting an election is only as good as the correlation of views between the betting pool and the voting pool. That correlation is low. Bettors self-select for those with money to lose, and those for whom betting is an acceptable pastime.


pages: 532 words: 139,706

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

23andMe, AltaVista, Anne Wojcicki, Apple's 1984 Super Bowl advert, Ben Horowitz, bioinformatics, Burning Man, carbon footprint, citizen journalism, Clayton Christensen, cloud computing, Colonization of Mars, commoditize, corporate social responsibility, creative destruction, 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, John Markoff, Kevin Kelly, knowledge worker, Long Term Capital Management, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Network effects, new economy, Nicholas Carr, PageRank, Paul Buchheit, Peter Thiel, Ralph Waldo Emerson, 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, zero-sum game

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.


Evil Genes: Why Rome Fell, Hitler Rose, Enron Failed, and My Sister Stole My Mother's Boyfriend by Barbara Oakley Phd

agricultural Revolution, Alfred Russel Wallace, Barry Marshall: ulcers, cognitive dissonance, conceptual framework, corporate governance, Deng Xiaoping, double helix, impulse control, Mahatma Gandhi, meta analysis, meta-analysis, Milgram experiment, Norbert Wiener, phenotype, Ponzi scheme, prisoner's dilemma, Richard Feynman, rolodex, Ronald Reagan, Silicon Valley, Stanford prison experiment, Steven Pinker, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, twin studies, union organizing, Y2K

Family upbringing, religion, political persuasion, educational background, work experience—all help create the different framing lenses people use.6 Practiced expertise with a musical instrument, for example, can change the structure of the musician's primary motor cortex; London's experienced taxi drivers develop enlarged back ends of their hippocampi as a result of the intricate mental map of the city that they develop and store.7 James Surowiecki's The Wisdom of Crowds drives home his counterintuitive thesis that multiple viewpoints from individuals with a wide range of backgrounds, rather than the restricted viewpoints of experts or specialists, are crucial in reaching informed decisions on complex topics. Such successful problem solving almost certainly reflects the value of using a wide variety of framing lenses. In some sense, getting input from a broad variety of people is like getting input from a wide variety of devices—microscopes, telescopes, litmus paper, tensile testors, ultrasound devices, and weighing scales.

But if we socialize only with members of our own particular religious persuasion; if we work in an environment with only one-sided political input; if we read only Web sites or other news sources by writers who echo our views, then we strongly reinforce the emotional, rather than logical, basis for our beliefs. After all—if “everyone” we know believes what we believe, we find an emotional reinforcement that helps close off consideration of other perspectives. (So much for the wisdom of crowds.) Aren't there times when we as citizens should respond with healthy emotions, to fight for what we believe in, especially when we feel policies are causing people actual harm? Of course. But simply looking at the research results, one must conclude that people's first emotional responses about what's wrong, who is to blame, or how to proceed, particularly in relation to complex issues, must always—always—be considered suspect.20 There is no simple algorithm for teasing rationality from emotion.

By looking at Mao's own thoughts as he described them in his commentaries, it's clear that Mao—that most Machiavellian of men—would have answered the question “One should take action only when sure it is morally right,” for example, with the seemingly low-Mach “strongly agree.”90 Mao's commentaries clearly stated his feeling that his own moral codes were the most valuable. Given his profound narcissism, we can reasonably assume Mao felt morally justified in doing whatever he wanted. Remember the “wisdom of crowds” and the value of using different framing lenses to come to the optimal solution to complex problems? By stifling dissent and ensuring all eyes were turned only to him for all decisions, Mao effectively made a hundred-million-fold cut in the effectiveness of planning and governing in revolutionary China. It's no wonder the Chinese economy stuttered into reverse. Fig. 9.4. In this 1966 photograph, Little Red Books are waved as Mao clearly relishes the adulation.


pages: 1,535 words: 337,071

Networks, Crowds, and Markets: Reasoning About a Highly Connected World by David Easley, Jon Kleinberg

Albert Einstein, AltaVista, clean water, conceptual framework, Daniel Kahneman / Amos Tversky, Douglas Hofstadter, Erdős number, experimental subject, first-price auction, fudge factor, George Akerlof, Gerard Salton, Gerard Salton, Gödel, Escher, Bach, incomplete markets, information asymmetry, information retrieval, John Nash: game theory, Kenneth Arrow, longitudinal study, market clearing, market microstructure, moral hazard, Nash equilibrium, Network effects, Pareto efficiency, Paul Erdős, planetary scale, prediction markets, price anchoring, price mechanism, prisoner's dilemma, random walk, recommendation engine, Richard Thaler, Ronald Coase, sealed-bid auction, search engine result page, second-price auction, second-price sealed-bid, Simon Singh, slashdot, social web, Steve Jobs, stochastic process, Ted Nelson, The Market for Lemons, The Wisdom of Crowds, trade route, transaction costs, ultimatum game, Vannevar Bush, Vickrey auction, Vilfredo Pareto, Yogi Berra, zero-sum game

More generally, how much influence a bettor’s beliefs have on the state price depends on how much of the aggregate wealth is controlled by that bettor. 22.3. AGGREGATE BELIEFS AND THE “WISDOM OF CROWDS” 713 So it really does make sense to think of the state prices as the market’s averaging of individual beliefs — or, in the more typical phrasing, they can be interpreted as the market’s beliefs. For our horse-race market (with the logarithmic utility function) this market probability is the weighted average of the investors’ beliefs, with each investor’s weight determined by his share of the wealth.3 The Relationship to the “Wisdom of Crowds.” What does this analysis say about the intuition popularized by recent books such as James Surowiecki’s The Wisdom of Crowds [377]? The basic argument there, drawing on a long history of intuition about markets, is that the aggregate behavior of many people, each with limited information, can produce very accurate beliefs.

. . . . . . . . . . . . . . . . 299 10.6 Advanced Material: A Proof of the Matching Theorem . . . . . . . . . . . . 300 10.7 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310 11 Network Models of Markets with Intermediaries 319 11.1 Price-Setting in Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 11.2 A Model of Trade on Networks . . . . . . . . . . . . . . . . . . . . . . . . . 323 11.3 Equilibria in Trading Networks . . . . . . . . . . . . . . . . . . . . . . . . . 330 11.4 Further Equilibrium Phenomena: Auctions and Ripple Effects . . . . . . . . 334 11.5 Social Welfare in Trading Networks . . . . . . . . . . . . . . . . . . . . . . . 338 11.6 Trader Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 11.7 Reflections on Trade with Intermediaries . . . . . . . . . . . . . . . . . . . . 342 11.8 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 12 Bargaining and Power in Networks 347 12.1 Power in Social Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347 12.2 Experimental Studies of Power and Exchange . . . . . . . . . . . . . . . . . 350 12.3 Results of Network Exchange Experiments . . . . . . . . . . . . . . . . . . . 352 12.4 A Connection to Buyer-Seller Networks . . . . . . . . . . . . . . . . . . . . . 356 12.5 Modeling Two-Person Interaction: The Nash Bargaining Solution . . . . . . 357 12.6 Modeling Two-Person Interaction: The Ultimatum Game . . . . . . . . . . . 360 12.7 Modeling Network Exchange: Stable Outcomes . . . . . . . . . . . . . . . . 362 12.8 Modeling Network Exchange: Balanced Outcomes . . . . . . . . . . . . . . . 366 12.9 Advanced Material: A Game-Theoretic Approach to Bargaining . . . . . . . 369 12.10Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 IV Information Networks and the World Wide Web 381 13 The Structure of the Web 383 13.1 The World Wide Web . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 13.2 Information Networks, Hypertext, and Associative Memory . . . . . . . . . . 386 13.3 The Web as a Directed Graph . . . . . . . . . . . . . . . . . . . . . . . . . . 394 13.4 The Bow-Tie Structure of the Web . . . . . . . . . . . . . . . . . . . . . . . 397 13.5 The Emergence of Web 2.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 13.6 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403 6 CONTENTS 14 Link Analysis and Web Search 405 14.1 Searching the Web: The Problem of Ranking . . . . . . . . . . . . . . . . . . 405 14.2 Link Analysis using Hubs and Authorities . . . . . . . . . . . . . . . . . . . 407 14.3 PageRank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 14.4 Applying Link Analysis in Modern Web Search . . . . . . . . . . . . . . . . 420 14.5 Applications beyond the Web . . . . . . . . . . . . . . . . . . . . . . . . . . 423 14.6 Advanced Material: Spectral Analysis, Random Walks, and Web Search . . . 425 14.7 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437 15 Sponsored Search Markets 445 15.1 Advertising Tied to Search Behavior . . . . . . . . . . . . . . . . . . . . . . 445 15.2 Advertising as a Matching Market . . . . . . . . . . . . . . . . . . . . . . . . 448 15.3 Encouraging Truthful Bidding in Matching Markets: The VCG Principle . . 452 15.4 Analyzing the VCG Procedure: Truth-Telling as a Dominant Strategy . . . . 457 15.5 The Generalized Second Price Auction . . . . . . . . . . . . . . . . . . . . . 460 15.6 Equilibria of the Generalized Second Price Auction . . . . . . . . . . . . . . 464 15.7 Ad Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 15.8 Complex Queries and Interactions Among Keywords . . . . . . . . . . . . . 469 15.9 Advanced Material: VCG Prices and the Market-Clearing Property . . . . . 470 15.10Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 V Network Dynamics: Population Models 489 16 Information Cascades 491 16.1 Following the Crowd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491 16.2 A Simple Herding Experiment . . . . . . . . . . . . . . . . . . . . . . . . . . 493 16.3 Bayes’ Rule: A Model of Decision-Making Under Uncertainty . . . . . . . . . 497 16.4 Bayes’ Rule in the Herding Experiment . . . . . . . . . . . . . . . . . . . . . 502 16.5 A Simple, General Cascade Model . . . . . . . . . . . . . . . . . . . . . . . . 504 16.6 Sequential Decision-Making and Cascades . . . . . . . . . . . . . . . . . . . 508 16.7 Lessons from Cascades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511 16.8 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 17 Network Effects 517 17.1 The Economy Without Network Effects . . . . . . . . . . . . . . . . . . . . . 518 17.2 The Economy with Network Effects . . . . . . . . . . . . . . . . . . . . . . . 522 17.3 Stability, Instability, and Tipping Points . . . . . . . . . . . . . . . . . . . . 525 17.4 A Dynamic View of the Market . . . . . . . . . . . . . . . . . . . . . . . . . 527 17.5 Industries with Network Goods . . . . . . . . . . . . . . . . . . . . . . . . . 534 17.6 Mixing Individual Effects with Population-Level Effects . . . . . . . . . . . . 536 17.7 Advanced Material: Negative Externalities and The El Farol Bar Problem . 541 17.8 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 CONTENTS 7 18 Power Laws and Rich-Get-Richer Phenomena 553 18.1 Popularity as a Network Phenomenon . . . . . . . . . . . . . . . . . . . . . . 553 18.2 Power Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 18.3 Rich-Get-Richer Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 18.4 The Unpredictability of Rich-Get-Richer Effects . . . . . . . . . . . . . . . . 559 18.5 The Long Tail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561 18.6 The Effect of Search Tools and Recommendation Systems . . . . . . . . . . . 564 18.7 Advanced Material: Analysis of Rich-Get-Richer Processes . . . . . . . . . . 565 18.8 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 VI Network Dynamics: Structural Models 571 19 Cascading Behavior in Networks 573 19.1 Diffusion in Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573 19.2 Modeling Diffusion through a Network . . . . . . . . . . . . . . . . . . . . . 575 19.3 Cascades and Clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 19.4 Diffusion, Thresholds, and the Role of Weak Ties . . . . . . . . . . . . . . . 588 19.5 Extensions of the Basic Cascade Model . . . . . . . . . . . . . . . . . . . . . 590 19.6 Knowledge, Thresholds, and Collective Action . . . . . . . . . . . . . . . . . 593 19.7 Advanced Material: The Cascade Capacity . . . . . . . . . . . . . . . . . . . 597 19.8 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 20 The Small-World Phenomenon 621 20.1 Six Degrees of Separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621 20.2 Structure and Randomness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622 20.3 Decentralized Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626 20.4 Modeling the Process of Decentralized Search . . . . . . . . . . . . . . . . . 629 20.5 Empirical Analysis and Generalized Models . . . . . . . . . . . . . . . . . . 632 20.6 Core-Periphery Structures and Difficulties in Decentralized Search . . . . . . 638 20.7 Advanced Material: Analysis of Decentralized Search . . . . . . . . . . . . . 640 20.8 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652 21 Epidemics 655 21.1 Diseases and the Networks that Transmit Them . . . . . . . . . . . . . . . . 655 21.2 Branching Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657 21.3 The SIR Epidemic Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 21.4 The SIS Epidemic Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 21.5 Synchronization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 21.6 Transient Contacts and the Dangers of Concurrency . . . . . . . . . . . . . . 672 21.7 Genealogy, Genetic Inheritance, and Mitochondrial Eve . . . . . . . . . . . . 676 21.8 Advanced Material: Analysis of Branching and Coalescent Processes . . . . . 682 21.9 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695 8 CONTENTS VII Institutions and Aggregate Behavior 699 22 Markets and Information 701 22.1 Markets with Exogenous Events . . . . . . . . . . . . . . . . . . . . . . . . . 702 22.2 Horse Races, Betting, and Beliefs . . . . . . . . . . . . . . . . . . . . . . . . 704 22.3 Aggregate Beliefs and the “Wisdom of Crowds” . . . . . . . . . . . . . . . . 710 22.4 Prediction Markets and Stock Markets . . . . . . . . . . . . . . . . . . . . . 714 22.5 Markets with Endogenous Events . . . . . . . . . . . . . . . . . . . . . . . . 717 22.6 The Market for Lemons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 22.7 Asymmetric Information in Other Markets . . . . . . . . . . . . . . . . . . . 724 22.8 Signaling Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 22.9 Quality Uncertainty On-Line: Reputation Systems and Other Mechanisms . 729 22.10Advanced Material: Wealth Dynamics in Markets . . . . . . . . . . . . . . . 732 22.11Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740 23 Voting 745 23.1 Voting for Group Decision-Making . . . . . . . . . . . . . . . . . . . . . . . 745 23.2 Individual Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 23.3 Voting Systems: Majority Rule . . . . . . . . . . . . . . . . . . . . . . . . . 750 23.4 Voting Systems: Positional Voting . . . . . . . . . . . . . . . . . . . . . . . . 755 23.5 Arrow’s Impossibility Theorem . . . . . . . . . . . . . . . . . . . . . . . . . 758 23.6 Single-Peaked Preferences and the Median Voter Theorem . . . . . . . . . . 760 23.7 Voting as a Form of Information Aggregation . . . . . . . . . . . . . . . . . . 766 23.8 Insincere Voting for Information Aggregation . . . . . . . . . . . . . . . . . . 768 23.9 Jury Decisions and the Unanimity Rule . . . . . . . . . . . . . . . . . . . . . 771 23.10Sequential Voting and the Relation to Information Cascades . . . . . . . . . 776 23.11Advanced Material: A Proof of Arrow’s Impossibility Theorem . . . . . . . . 777 23.12Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782 24 Property Rights 785 24.1 Externalities and the Coase Theorem . . . . . . . . . . . . . . . . . . . . . . 785 24.2 The Tragedy of the Commons . . . . . . . . . . . . . . . . . . . . . . . . . . 790 24.3 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793 24.4 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Chapter 1 Overview Over the past decade there has been a growing public fascination with the complex “connectedness” of modern society.

For example, many of the key rallying cries that accompanied the emergence of Web 2.0 are in a sense shorthand for social phenomena that we discuss in other chapters: • “Software that gets better the more people use it.” A core principle of Web 2.0 is that on-line Web sites and services can become more appealing to users — and in fact, often genuinely more valuable to them — as their audiences grow larger. When and how this process takes place forms a central focus in chapters from the next two parts of the book, particularly Chapters 16, 17, and 19. • “The wisdom of crowds.” The collaborative authoring of an encyclopedia by millions on Wikipedia, the elevation of news content by group evaluation on digg, the fact that photos of breaking news now often appear on Flickr before they do in the mainstream news, and many similar developments highlighted the ways in which the audience of a Web 2.0 site — each contributing specific expertise and sometimes misinformation —can produce a collective artifact of significant value.


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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

airport security, Alfred Russel Wallace, Amazon Mechanical Turk, Berlin Wall, Black Swan, book scanning, Cass Sunstein, commoditize, 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, Johannes Kepler, 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, 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.

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?

See also Books and book publishing Paper-based tools Parenting experts Patent Office, US PatientsLikeMe.com Pavement performance Peer-review journals Perception, facts and Permission-free knowledge Philosophy defining and quantifying knowledge information overload reality unresolved knowledge Pinker, Steven Planetary Skin initiative Plato PLoS One online journal Pogue, David Polio vaccine Politics Politifact.com Popper, Karl Population growth, Malthusian theory of Pornography Postmodernism Pragmatism PressThink.org Primary Insight Principles of Geology (Lyell) Prize4Life Protein folding ProteomeCommons.org Pseudo-science Public Library of Science (PLoS) Punchcard data Pyramid, knowledge Pyramid of organizational efficiency Quora Racial/ethnic identity Ramanujan, Srinivasa RAND Corporation Random Hacks of Kindness Rauscher, Francis Raymond, Eric Reagan, Ronald Reality Reason as the path to truth and knowledge critical debate on unresolved knowledge Reliability Repositories, open access Republic of Letters Republican Party Republic.com (Sunstein) Revolution in the Middle East Rheingold, Howard Richards, Ellen Swallow Riesman, David Robustness “The Rock” (Eliot) Rogers, William Rorty, Richard Rosen, Jay Roskam, Peter Rushkoff, Douglas Russia: Dogger Bank Incident Salk, Jonas Sanger, Larry Schmidt, Michael School shootings Science amateurs in crowdsourcing expertise failures in goals of hyperlinked inflation of scientific studies interdisciplinary approaches media relations Net-based inquiry open filtering journal articles open-notebook overgeneration of scientific facts philosophical and professional differences among scientists public and private realms scientific journals transformation of scientific knowledge Science at Creative Commons Science journal Scientific journals Scientific management Scientific method Self-interest: fact-based knowledge Semantic Web Seneca Sensory overload Sexual behavior The Shallows (Carr) Shapiro, Jesse Shared experiences Shilts, Randy Shirky, Clay Shoemaker, Carolyn Simplicity in scientific thought Simulation of physical interactions Slashdot.com Sloan Digital Sky Survey Smart mobs “Smarter planet” initiative Smith, Arfon Smith, Richard Soccer Social conformity Social networks crowdsourcing expertise Middle East revolutions pooling expertise scaling social filtering Social policy: social role of facts Social reform Dickens’s antipathy to fact-based knowledge global statistical support for Bentham’s ideas Social tools: information overload Society of Professional Journalists Socrates Software defaults Software development, contests for Sotomayor, Sonia Source transparency Space Shuttle disaster Spiro, Mary Sports Sprinkle, Annie Standpoint transparency Statistics emergence of Hunch.com Stopping points for knowledge The Structure of Scientific Revolutions (Kuhn) Stupidity, Net increasing Sub-networks Suel, Gurol Sunlight Foundation Sunstein, Cass Surowiecki, James Systems biology Tag cloud Tagging Tatalias, Jean Taylor, Frederick Wilson TechCamps Technodeterminism Technology easing information overload Technorati.com Television, homophily and Temptation of hyperlinks Think tanks Thoreau, Henry David The Tipping Point (Gladwell) Todd, Mac Toffler, Alvin TopCopder Topic-based expertise Torvalds, Linus Traditional knowledge Tranche Transparency hyperlinks contributing to objectivity and of the Net Open Government Initiative Transparency and Open Government project Triangular knowledge Trillin, Calvin Trust: reliability of information Trust-through-authority system Truth elements of knowledge reason as the path to value of networked knowledge Twitter Tyme, Mae Unnailing facts Updike, John USAID UsefulChem notebook Vaccinations Verizon Vietnam Virginia Polytechnic Institute and State University Wales, Jimmy Wallace, Alfred Russel Walter, Skip Washington Post Watson, James Welch, Jack Welfare The WELL (The Whole Earth’Lectronic Link) Whole Earth Catalog Wikipedia editorial policy LA Times wikitorial experiment policymaking Virginia Tech shootings Wikswo, John Wilbanks, John Wired magazine The Wisdom of Crowds (Surowiecki) Wise crowds Wittgenstein, Ludwig Wolfram, Stephen WolframAlpha.com World Bank World Cup World War I Wurman, Richard Saul Wycliffe, John York, Jillian YourEncore Zappa, Frank Zeleny, Milan Zettabyte Zittrain, Jonathan Zuckerman, Ethan a I’m leaving this as an unsupported idea because it’s not the point of this book. I here merely intend to prevent readers from misinterpreting me in a particularly tempting way.


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

Airbnb, barriers to entry, Bernie Madoff, bike sharing scheme, Buckminster Fuller, buy and hold, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, commoditize, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, George Akerlof, global village, hedonic treadmill, 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, peer-to-peer lending, peer-to-peer rental, 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).


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

Albert Einstein, Boris Johnson, British Empire, California gold rush, cognitive dissonance, dark matter, double helix, epigenetics, Johann Wolfgang von Goethe, Johannes Kepler, Kickstarter, music of the spheres, Nelson Mandela, 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.


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The Art of Statistics: Learning From Data by David Spiegelhalter

Antoine Gombaud: Chevalier de Méré, Bayesian statistics, Carmen Reinhart, complexity theory, computer vision, correlation coefficient, correlation does not imply causation, dark matter, Edmond Halley, Estimating the Reproducibility of Psychological Science, Hans Rosling, Kenneth Rogoff, meta analysis, meta-analysis, Nate Silver, Netflix Prize, p-value, placebo effect, probability theory / Blaise Pascal / Pierre de Fermat, publication bias, randomized controlled trial, recommendation engine, replication crisis, self-driving car, speech recognition, statistical model, The Design of Experiments, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus

Relative risks tend to convey an exaggerated importance, and absolute risks should be provided for clarity. Expected frequencies promote understanding and an appropriate sense of importance. Odds ratios arise from scientific studies but should not be used for general communication. Graphics need to be chosen with care and awareness of their impact. CHAPTER 2 Summarizing and Communicating Numbers. Lots of Numbers Can we trust the wisdom of crowds? In 1907 Francis Galton, cousin of Charles Darwin and polymath originator of identification using fingerprints, weather forecasts and eugenics,fn1 wrote a letter to the prestigious science journal Nature about his visit to the Fat Stock and Poultry Exhibition in the port city of Plymouth. There he saw a large ox displayed and contestants paying sixpence to guess the ‘dressed’ weight of the resulting meat after the poor beast had been slaughtered.

He got hold of 787 of the tickets that had been filled out and chose the middle value of 1,207 lb (547 kg) as the democratic choice, ‘every other estimate being condemned as too high or too low by the majority of voters’. The dressed weight turned out to be 1,198 lb (543 kg), which was remarkably close to his choice based on the 787 votes.1 Galton titled his letter ‘Vox Populi’ (voice of the people), but this process of decision-making is now better known as the wisdom of crowds. Galton carried out what we might now call a data summary: he took a mass of numbers written on tickets and reduced them to a single estimated weight of 1,207 lb. In this chapter we look at the techniques that have been developed in the subsequent century for summarizing and communicating the piles of data that have become available. We will see that numerical summaries of location, spread, trend and correlation are intimately related to how the data can be plotted on paper or a screen.

The true value was … 1,616.2 Just one person guessed this precisely, 45% of people guessed below 1,616, and 55% guessed above, so there was little systematic tendency for the guesses to be either on the high or low side – we say the true value lay at the 45th percentile of the empirical data distribution. The median, which is the 50th percentile, over-estimated the true value by 1,775 – 1,616 = 159, so relative to the true answer the median was an over-estimate by around 10%, and only around 1 in 10 people got that close. So the wisdom of crowds was fairly good, getting closer to the truth than 90% of the individual people. Describing the Spread of a Data Distribution It is not enough to give a single summary for a distribution – we need to have an idea of the spread, sometimes known as the variability. For example, knowing the average adult male shoe size will not help a shoe firm decide the quantities of each size to make.


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

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, Panopticon Jeremy Bentham, 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

active measures, affirmative action, Albert Einstein, Amazon Mechanical Turk, Black Swan, business cycle, butterfly effect, Carmen Reinhart, Cass Sunstein, clockwork universe, cognitive dissonance, coherent worldview, 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, George Santayana, happiness index / gross national happiness, high batting average, hindsight bias, illegal immigration, industrial cluster, 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, Laplace demon, 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, Pierre-Simon Laplace, planetary scale, prediction markets, pre–internet, RAND corporation, random walk, RFID, school choice, Silicon Valley, social intelligence, 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.


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Can Democracy Work?: A Short History of a Radical Idea, From Ancient Athens to Our World by James Miller

Berlin Wall, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, colonial rule, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, Donald Trump, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, income inequality, Joseph Schumpeter, mass incarceration, means of production, Occupy movement, Ralph Waldo Emerson, Republic of Letters, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, transatlantic slave trade, union organizing, upwardly mobile, Vilfredo Pareto

“the common reason”: See the discussion in Lucien Jaume, Le discours Jacobin et la démocratie (Paris: Fayard, 1989), 305–323. “Take away from these … wills the pluses and minuses”: Rousseau, Social Contract, bk. 2, chap. 3, in Œuvres complètes, 3:371. According to Condorcet’s mathematical argument: See Hélène Landemore, Democratic Reason: Politics, Intelligence, and the Rule of the Many (Princeton: Princeton University Press, 2013), 70–75. “the wisdom of crowds”: James Surowiecki, The Wisdom of Crowds (New York: Doubleday, 2004). “I saw people pass by, arm in arm”: Louis-Sébestien Mercier, Paris pendant la Révolution (1789–1798), ou, Le Nouveau Paris (Paris, 1862), bk. 3, chap. 82. “To form a constitution for a territory”: An Authentic Copy of the New Plan of the French Constitution, as Presented to the National Convention, by the Committee of Constitution, to Which Is Prefixed the Speech of M.

Rousseau himself had oscillated wildly between efforts to bring some measure of reason to bear in public life and his deep suspicion of smooth talkers able to produce apparent reasons for almost anything. Far more emphatically than Condorcet, Rousseau also respected the role that sentiments and the passions played in public life. Rousseau’s ambivalence about reason would eventually reappear—with a vengeance—in the Convention’s debates over Condorcet’s draft constitution, which represented a remarkable attempt to institutionalize what one modern writer has called “the wisdom of crowds.” * * * ON JANUARY 21, 1793, thousands of Frenchmen flocked to the largest square in Paris, once the Place de Louis XV, but renamed the Place de la Révolution (and eventually, in a gesture of reconciliation, renamed Place de la Concorde). The crowd had gathered on that wintry day to watch their former king face death. Louis stoically mounted the scaffold, and, after protesting his innocence, was strapped onto a board and pushed under the guillotine that had been installed at the center of the square.

And even though the line between my considered ideals and what someone else might see as an internalized ideology is blurry, I find as a result that I harbor hopes that form part of who I take myself to be, and therefore inform my own picture of “who we are.” My experience with participatory democracy has taught me the limits of any regime of consensus, which risks silencing disagreements over political alternatives that are important to debate openly. Our ability to reason and exercise sound political judgment is more limited than Condorcet supposed—rendering “the wisdom of crowds” a shaky assumption. But I also believe that modern institutions can do more to appeal to, and engage, people’s capacities for reflection and collective deliberation. As the American philosopher David M. Estlund observes, “We sometimes expect too little” from our liberal democracies “precisely because” we prematurely give up on an “aspirational theory,” a “normative standard that forces the question of whether more can realistically be expected.”


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You Are Not a Gadget by Jaron Lanier

1960s counterculture, accounting loophole / creative accounting, additive manufacturing, Albert Einstein, call centre, cloud computing, commoditize, crowdsourcing, death of newspapers, different worldview, 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.


pages: 247 words: 63,208

The Open Organization: Igniting Passion and Performance by Jim Whitehurst

Airbnb, cloud computing, crowdsourcing, en.wikipedia.org, Google Hangouts, Infrastructure as a Service, job satisfaction, market design, Network effects, new economy, place-making, platform as a service, post-materialism, profit motive, risk tolerance, shareholder value, side project, Silicon Valley, Skype, Snapchat, Steve Jobs, subscription business, The Wisdom of Crowds, Tony Hsieh

More than fifty years of research suggest that irrational thinking occurs when people try to reach decisions in groups, and this can lead to a polarization of opinions and a highly biased assessment of a situation.”3 One term we often hear is groupthink, coined by William H. Whyte, author of The Organization Man, in a 1952 issue of Fortune. The idea is that when a group of people work together, they tend to want to reach some kind of harmony and to minimize conflict, which so often leads to terrible and even tragic results. James Surowiecki tackles this subject in his now famous book, The Wisdom of Crowds, in which he discusses the research done by the Yale University psychologist Irving Janis to understand how groupthink was responsible for the poor decision making leading up to events like the attack on Pearl Harbor and the Bay of Pigs invasion. Surowiecki writes: “Homogeneous groups become more cohesive more easily than diverse groups, and as they become more cohesive they become more dependent on the group, more isolated from outside opinions, and therefore more convinced that the group’s judgment on important issues must be right.

Burchell and Robin, The Great Workplace, 41. Chapter 5 1. Peter F. Drucker, “Managing Oneself,” Harvard Business Review, January 2005, http://hbr.org/2005/01/managing-oneself/ar/1. 2. Jonah Lehrer, “Groupthink: The Brainstorming Myth,” The New Yorker, January 30, 2012. 3. Richard Wiseman, 59 Seconds: Think a Little, Change a Lot (New York: Random House, 2010), 213–214. 4. James Surowiecki, The Wisdom of Crowds (New York: Anchor, 2005), 36. 5. Hill et al., Collective Genius, 121. 6. Ed Catmull and Amy Wallace, Creativity, Inc. (New York: Random House, 2014), Kindle version, location 1374. 7. Hill et al., Collective Genius, 139. 8. Ibid., 24. 9. Linux Kernel Mailing List, https://lkml.org/lkml/2013/2/21/225. 10. Michael Hickins, “Linux Throw-Down Sheds Light on ‘Moronic’ Software Processes,” Wall Street Journal, March 1, 2013. 11.

Sinek, Simon. Start with Why. New York: Portfolio, 2009. Sisodia, Rajendra S., Jagdish N. Sheth, and David Wolfe. Firms of Endearment. Upper Saddle River, NJ: Pearson Education, 2014. Sloane, Paul, ed. A Guide to Open Innovation and Crowdsourcing. Philadelphia: Kogan Page Limited, 2011. Stack, Jack, with Bo Burlingham. The Great Game of Business. New York: Crown Business, 2013. Surowiecki, James. The Wisdom of Crowds. New York: Anchor, 2005. Tapscott, Don, David Ticoll, and Alex Lowy. Digital Capital. Boston: Harvard Business School Press, 2000. Tapscott, Don, and David Ticoll. The Naked Corporation. New York: Penguin, 2003. Tapscott, Don, and Anthony D. Williams. Wikinomics. New York: Portfolio Penguin, 2008. ——— . Macrowikinomics. New York: Portfolio Penguin, 2010. Thompson, Kenneth R., Ramon L.


pages: 121 words: 31,813

The Art of Execution: How the World's Best Investors Get It Wrong and Still Make Millions by Lee Freeman-Shor

Black Swan, buy and hold, cognitive bias, collapse of Lehman Brothers, credit crunch, Daniel Kahneman / Amos Tversky, diversified portfolio, family office, I think there is a world market for maybe five computers, index fund, Isaac Newton, Jeff Bezos, Long Term Capital Management, loss aversion, Richard Thaler, Robert Shiller, Robert Shiller, rolodex, Skype, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, technology bubble, The Wisdom of Crowds, too big to fail, tulip mania, zero-sum game

* * * 3 ‘Judgment under uncertainty: Heuristics and biases’, Science, by Amos Tversky and Daniel Kahneman (1974). 4 Free Radicals: The Secret Anarchy of Science, by Michael Brooks (2011). 5 The General Theory of Employment, Interest and Money, by John Maynard Keynes (1936). 6 How We Decide, by Johan Lehrer (2009). 7 ‘Money: A Bias for the Whole’, Journal of Consumer Research, by Himanshu Mishra, Arul Mishra and Dhananjay Nayakankuppam (2006). 8 ‘Denomination Effect’, Journal of Consumer Research, Priya Raghubir and Joydeep Srivastava (2009). 9 One Up on Wall Street, by Peter Lynch and John Rothchild (2000). 10 The Dhandho Investor, by Mohnish Pabrai (2007). 11 Quote attributed to Donald Rumsfeld. 12 Being Right or Making Money, by Ned Davis (2000). 13 Ibid. 14 Fortune’s Formula, by William Poundstone (2006). 15 blog.asmartbear.com/ignoring-the-wisdom-of-crowds.html 16 The Little Book of Behavioural Investing, by James Montier (2010). 17 An Astronaut’s Guide to Life on Earth, by Col. Chris Hadfield (2013). Referring to his first mission where the objective was to construct a docking module on the Russian space station Mir. 18 In Market Wizards, by Jack D. Schwager (1990). 19 In The New Market Wizards, by Jack D. Schwager (1994). 20 So Far, So Good, by Roy R. Neuberger (1997). 21 The Wisdom of Crowds, by James Surowiecki (2005) 22 Predictably Irrational, by Dan Ariely (2009). “[T]o be a great investor you should have a clear maximum time for the idea to play out.” 23 The Dhandho Investor, by Mohnish Pabrai (2007). 24 ‘Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice’, Management Science, Richard H.


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

Asian financial crisis, banking crisis, Berlin Wall, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, cognitive bias, cuban missile crisis, energy security, flex fuel, global pandemic, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John von Neumann, mass immigration, 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).


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

business cycle, capital controls, cognitive dissonance, Colonization of Mars, complexity theory, continuation of politics by other means, 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: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

4chan, airport security, AltaVista, anti-communist, anti-pattern, barriers to entry, Bill Duvall, bitcoin, blockchain, business climate, business intelligence, business process, Chelsea Manning, clean water, commoditize, 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, intangible asset, invisible hand, James Watt: steam engine, Jeff Rulifson, Julian Assange, Kickstarter, M-Pesa, mass immigration, mass incarceration, mega-rich, MITM: man-in-the-middle, mutually assured destruction, Naomi Klein, national security letter, Nelson Mandela, 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 Stallman, Ross Ulbricht, Satoshi Nakamoto, security theater, selection bias, 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, twin studies, union organizing, wealth creators, 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: 464 words: 117,495

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

additive manufacturing, Atul Gawande, backtesting, Benoit Mandelbrot, buy and hold, buy low sell high, Checklist Manifesto, computerized trading, 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, zero-sum game

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: 313 words: 84,312

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

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, disruptive innovation, double helix, Douglas Engelbart, 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, Johannes Kepler, John Markoff, John von Neumann, Joi Ito, Kevin Kelly, knowledge economy, knowledge worker, lateral thinking, lone genius, M-Pesa, Mark Shuttleworth, Mark Zuckerberg, Marshall McLuhan, Menlo Park, microcredit, Mitch Kapor, new economy, Nicholas Carr, online collectivism, planetary scale, post scarcity, Richard Stallman, Shoshana Zuboff, 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: 348 words: 83,490

More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded) by Michael J. Mauboussin

Albert Einstein, Andrei Shleifer, Atul Gawande, availability heuristic, beat the dealer, Benoit Mandelbrot, Black Swan, Brownian motion, butter production in bangladesh, buy and hold, capital asset pricing model, Clayton Christensen, clockwork universe, complexity theory, corporate governance, creative destruction, Daniel Kahneman / Amos Tversky, deliberate practice, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, dogs of the Dow, Drosophila, Edward Thorp, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, fixed income, framing effect, functional fixedness, hindsight bias, hiring and firing, Howard Rheingold, index fund, information asymmetry, intangible asset, invisible hand, Isaac Newton, Jeff Bezos, Kenneth Arrow, Laplace demon, Long Term Capital Management, loss aversion, mandelbrot fractal, margin call, market bubble, Menlo Park, mental accounting, Milgram experiment, Murray Gell-Mann, Nash equilibrium, new economy, Paul Samuelson, Pierre-Simon Laplace, quantitative trading / quantitative finance, random walk, Richard Florida, Richard Thaler, Robert Shiller, Robert Shiller, shareholder value, statistical model, Steven Pinker, stocks for the long run, survivorship bias, The Wisdom of Crowds, transaction costs, traveling salesman, value at risk, wealth creators, women in the workforce, zero-sum game

Dawes, David Faust, and Paul E. Meehl, “Clinical Versus Actuarial Judgment,” in Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 716-29. 6 Gawande, Complications, 44. 7 Katie Haffner, “In an Ancient Game, Computing’s Future,” The New York Times, August 1, 2002. 8 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). 9 Joe Nocera, “On Oil Supply, Opinions Aren’t Scarce,” The New York Times, September 10, 2005. 10 Philip E. Tetlock, Expert Political Judgment: How Good Is It? How Can We Know? (Princeton, N.J.: Princeton University Press, 2005), 68. 11 Ibid., 73-75. 7.

ar=1358&L2=18&L3=31&srid=6&gp=1. 2 Nancy Weil, “Innocentive Pairs R&D Challenges with Researchers,” Bio-IT World, May 29, 2003. 3 Some companies are trying to create an internal mechanism to match questions with answers. For example, Hewlett-Packard has a system called SHOCK (Social Harvesting of Community Knowledge); see http://www.hpl.hp.com/research/idl/projects/shock. 4 Francis Galton, “Vox Populi,” Nature 75 (March 7, 1907): 450-451; reprint, 1949. Also, 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). 5 Norman L. Johnson, “Collective Problem Solving: Functionality beyond the Individual,” LA-UR-98-2227 (1998); Jack L. Treynor, “Market Efficiency and the Bean Jar Experiment,” Financial Analysts Journal (May-June 1987): -53; Sherry Sontag and Christopher Drew, Blind Man’s Bluff: The Untold Story of American Submarine Espionage (New York: Perseus Books, 1998), 58-59. 6 Kay-Yut Chen, Leslie R.

Journal of Applied Corporate Finance 7, no. 2 (Summer 1994): 46-70. Stewart, Thomas A. “How to Think with Your Gut.” Business 2.0, November 2002. Strogatz, Steven. Sync: The Emerging Science of Spontaneous Order. New York: Hyperion Books, 2003. Surowiecki, James. “Damn the Slam PAM Plan!” Slate, July 30, 2003. ——. “Decisions, Decisions.” New Yorker, March 28, 2003. http://www.newyorker.com/archive/2003/03/24/030324ta_talk_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. Taleb, Nassim Nicholas. Fooled By Randomness: The Hidden Role of Chance in Markets and in Life. New York: Texere, 2001. ——. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007. Tallis, Frank. Hidden Minds: A History of the Unconscious.


pages: 250 words: 88,762

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

activist fund / activist shareholder / activist investor, affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, business cycle, 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, zero-sum game

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

23andMe, Amazon Mechanical Turk, Amazon Web Services, Anne Wojcicki, barriers to entry, Berlin Wall, business process, call centre, cashless society, citizen journalism, clean water, commoditize, connected car, credit crunch, crowdsourcing, death of newspapers, different worldview, disintermediation, diversified portfolio, don't be evil, fear of failure, Firefox, future of journalism, G4S, 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, old-boy network, 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, WikiLeaks, 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: 407 words: 103,501

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

Amazon Mechanical Turk, Andrew Keen, business cycle, 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, moral panic, Network effects, new economy, Nicholas Carr, PageRank, peer-to-peer, 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: 218 words: 44,364

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

Atahualpa, barriers to entry, Burning Man, creative destruction, disintermediation, experimental economics, Firefox, Francisco Pizarro, jimmy wales, Kibera, Lao Tzu, Network effects, peer-to-peer, 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: 807 words: 154,435

Radical Uncertainty: Decision-Making for an Unknowable Future by Mervyn King, John Kay

"Robert Solow", Airbus A320, Albert Einstein, Albert Michelson, algorithmic trading, Antoine Gombaud: Chevalier de Méré, Arthur Eddington, autonomous vehicles, availability heuristic, banking crisis, Barry Marshall: ulcers, battle of ideas, Benoit Mandelbrot, bitcoin, Black Swan, Bonfire of the Vanities, Brownian motion, business cycle, business process, capital asset pricing model, central bank independence, collapse of Lehman Brothers, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, Donald Trump, easy for humans, difficult for computers, Edmond Halley, Edward Lloyd's coffeehouse, Edward Thorp, Elon Musk, Ethereum, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, fear of failure, feminist movement, financial deregulation, George Akerlof, germ theory of disease, Hans Rosling, Ignaz Semmelweis: hand washing, income per capita, incomplete markets, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Jeff Bezos, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, John von Neumann, Kenneth Arrow, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, market bubble, market fundamentalism, Moneyball by Michael Lewis explains big data, Nash equilibrium, Nate Silver, new economy, Nick Leeson, Northern Rock, oil shock, Paul Samuelson, peak oil, Peter Thiel, Philip Mirowski, Pierre-Simon Laplace, popular electronics, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, railway mania, RAND corporation, rent-seeking, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Coase, sealed-bid auction, shareholder value, Silicon Valley, Simon Kuznets, Socratic dialogue, South Sea Bubble, spectrum auction, Steve Ballmer, Steve Jobs, Steve Wozniak, Tacoma Narrows Bridge, Thales and the olive presses, Thales of Miletus, The Chicago School, the map is not the territory, The Market for Lemons, The Nature of the Firm, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Davenport, Thomas Malthus, Toyota Production System, transaction costs, ultimatum game, urban planning, value at risk, World Values Survey, Yom Kippur War, zero-sum game

They do not know who the runners and riders are, far less their form, or when the race will take place. Nor do they intend to bet on the outcome, or to find out the name of the winner when the finishing list is posted. When decisions do matter, rational people delegate them to those who have, or are willing to invest in acquiring, relevant information and the capacity to interpret that information. For all that has recently been said about ‘the wisdom of crowds’, the authors prefer to fly with airlines which rely on the services of skilled and experienced pilots, rather than those who entrust the controls to the average opinion of the passengers. 13 There is no general theory of how best to make decisions. Much of the academic literature on decision-making under uncertainty tries to frame the challenge as a puzzle. All decisions, it is assumed, can be expressed as mathematical problems.

Our ability as humans to deal with radical uncertainty is the product of our much greater capacity for social learning and greater ability to communicate relative to other species. We are social animals; we manage radical uncertainty in a context determined by the knowledge we have acquired through education and experience, and we make important decisions in conjunction with others – friends, family, colleagues and advisers. Reference to the ‘wisdom of crowds’ makes an important point while missing another. The crowd always knows more than any individual, but what is valuable is the aggregate of its knowledge, not the average of its knowledge. Given the overwhelmingly large body of knowledge and experience which makes up our collective intelligence, and the obvious necessity for specialisation, the rational person following the requirements of logic and reason answers most questions about what will happen in the future or what will be the consequence of particular actions by saying ‘I do not know – if it matters I will try to find out’.

., ‘Interview: Bruce Sterling on the Convergence of Humans and Machines’ (22 Feb 2015) < https://www.nextnature.net/2015/02/interview-bruce-sterling/ > (accessed 14 May 2018) Stevenson, M. T., ‘Assessing Risk Assessment in Action’, Minnesota Law Review , Vol. 103, No. 1 (2019), 303–84 Stevenson, R. L., ‘The Day After To-Morrow’, The Contemporary Review , Vol. 51 (1887), 472–9 Surowiecki, J., The Wisdom of Crowds (Boston: Little Brown, 2004) Swanson, I., ‘Revealed: Final Cost of Edinburgh Tram Scheme Will be £1 Billion’, The Scotsman (13 Dec 2017) Taft, J. G., ‘Why Knight Capital Was Saved and Lehman Brothers Failed’, Forbes (20 Aug 2012) < https://www.forbes.com/sites/advisor/2012/08/20/why-knight-capital-was-saved-and-lehman-brothers-failed/ > (accessed 14 Jan 2019) Taleb, N. N., Antifragile: Things that Gain from Disorder (London: Penguin, 2013) Taleb, N.


pages: 405 words: 109,114

Unfinished Business by Tamim Bayoumi

algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, hiring and firing, housing crisis, inflation targeting, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Robert Shiller, Rubik’s Cube, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

The efficient market hypothesis essentially states that financial prices aggregate all available information, and hence that there is no investment strategy that can consistently beat the market. Put differently, if it is known to investors that (say) shares in General Motors are undervalued and will go up soon, then investors will bid up the price immediately until it reaches this fair value. While the theory and its tests come in softer and harder forms, the idea is that no individual investor or policy institution can beat the wisdom of crowds. This has implications for short- and long-term behavior. The short-term prediction is that day-to-day movements in prices of stocks and bonds are unpredictable except to the extent that they reflect new information. Clearly, if General Motors announces profits that are higher than investors expect then the price of its shares will increase. However, it is equally likely that the profit announcement will disappoint and shares will go down.

The basic issue is that far-sighted and well-informed investors will project the dynamics of the market and realize that the future path of assets prices is unstable and will at some point collapse. As a result, they will never start down the path towards a bubble as they understand that it is inherently unstable. This inability to model “rational” asset bubbles helped fuel the popularity of the efficient markets hypothesis—in which asset prices reflected the wisdom of crowds and were thus always accurate—that helped to lull policymakers into underestimating the risks emanating from growing financial imbalances in the United States and European economies. More generally, the hyper-rational and far-seeing “homo economicus” has been elevated from a useful tool to something closer to a litmus test for economic modeling. Any macroeconomic analysis is seen as questionable unless the underlying behavior can be shown to derive from first principles.

In the end, economics is a practical science that should reflect underlying realities, akin to engineering or biology in which shortcuts are taken in order to explain real phenomena, rather than theoretical physics with its search for immutable principles. Indeed, even theoretical physics has accepted for around a century the existence of general relativity and quantum mechanics, two apparently incompatible approaches. There is also a major issue as to whether a coherent view of the long-run path for the economy can be constructed. On a practical level, it assumes that individuals acting through the wisdom of crowds understand an awful lot about the economy. On a theoretical level, as discussed in an earlier chapter, the existence of “unknown unknowns” may make it impossible to calculate a well-defined future. In this case, ad hoc rules of thumb may be the best available option. The long-run may truly be a quantum process in which unexpected events cause shifts from one view of the world to another.


pages: 219 words: 63,495

50 Future Ideas You Really Need to Know by Richard Watson

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, digital map, Elon Musk, energy security, failed state, future of work, Geoffrey West, Santa Fe Institute, germ theory of disease, global pandemic, happiness index / gross national happiness, hive mind, hydrogen economy, Internet of things, Jaron Lanier, life extension, Mark Shuttleworth, 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: 533

Future Politics: Living Together in a World Transformed by Tech by Jamie Susskind

3D printing, additive manufacturing, affirmative action, agricultural Revolution, Airbnb, airport security, Andrew Keen, artificial general intelligence, augmented reality, automated trading system, autonomous vehicles, basic income, Bertrand Russell: In Praise of Idleness, bitcoin, blockchain, brain emulation, British Empire, business process, Capital in the Twenty-First Century by Thomas Piketty, cashless society, Cass Sunstein, cellular automata, cloud computing, computer age, computer vision, continuation of politics by other means, correlation does not imply causation, crowdsourcing, cryptocurrency, digital map, distributed ledger, Donald Trump, easy for humans, difficult for computers, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, Filter Bubble, future of work, Google bus, Google X / Alphabet X, Googley, industrial robot, informal economy, intangible asset, Internet of things, invention of the printing press, invention of writing, Isaac Newton, Jaron Lanier, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge economy, lifelogging, Metcalfe’s law, mittelstand, more computing power than Apollo, move fast and break things, move fast and break things, natural language processing, Network effects, new economy, night-watchman state, Oculus Rift, Panopticon Jeremy Bentham, pattern recognition, payday loans, price discrimination, price mechanism, RAND corporation, ransomware, Ray Kurzweil, Richard Stallman, ride hailing / ride sharing, road to serfdom, Robert Mercer, Satoshi Nakamoto, Second Machine Age, selection bias, self-driving car, sexual politics, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, smart contracts, Snapchat, speech recognition, Steve Jobs, Steve Wozniak, Steven Levy, technological singularity, the built environment, The Structural Transformation of the Public Sphere, The Wisdom of Crowds, Thomas L Friedman, universal basic income, urban planning, Watson beat the top human players on Jeopardy!, working-age population

One group, called the counters, say that as a matter of mathematical logic a large and more diverse group of people will answer political questions better than a smaller group—even one composed of experts.55 This line of thinking can be traced back to the seventeenth-century Dutch thinker Baruch Spinoza, who believed that ‘it is almost impossible that the majority of a people, especially if it be a large one, should agree in an i­ rrational design.’56 Spinoza’s conviction was shared by the Marquis de Condorcet, the eighteenth-century philosopher and mathematician whose famous Jury Theorem holds, in basic terms, that if a large group votes on a yes-or-no issue, the majority of voters are virtually certain to vote for the correct answer as long as: (a) the median voter is better than random at choosing correct answers, (b) voters vote independently of each other, and (c) voters vote sincerely rather than strategically. These days, this phenomenon is referred to as the wisdom of crowds.57 It explains the hoary old tale in which the average answer of 800 participants in a competition OUP CORRECTED PROOF – FINAL, 30/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS The Dream of Democracy 225 to guess the weight of an ox was within one pound of the ­correct number.58 Another group of theorists, called the talkers, say that democracy is more than mere aggregation of individual opinions.

Like Direct Democracy,Wiki Democracy would reduce the role of elected representatives. And in a Wiki Democracy we would not merely be asked to say yes or no to a set of pre-ordained questions decided by someone else; instead we would have the chance to shape the agenda ourselves in a richer and more meaningful way.Wiki Democracy also enjoys some of the same epistemic advantages of Direct Democracy, in that it would draw on the wisdom of crowds generally and (where appropriate) experts in particular. In a full-blown Wiki Democracy, as in a Direct Democracy, there would have to be flexibility in how and to what extent individuals OUP CORRECTED PROOF – FINAL, 26/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS DEMOCRACY IN THE FUTURE 245 contributed.The policymaking process could be broken down into various parts (diagnosis, framing, data-collection, drafting and refining legislation, and so forth) and each part could be guided by the groups and individuals most willing or best placed to contribute.54 In a world of code-ified law (see chapter six) the code/law could theoretically be reprogrammable by the public at large, or by persons or AI systems delegated to undertake the task for them.

Josiah Ober, Democracy and Knowledge: Innovation and Learning in Classical Athens (Princeton: Princeton University Press, 2008). 55. See Landemore, Democratic Reason; Philip E. Tetlock, Expert Political Judgment: How Good Is It? How Can We Know? (Princeton: Princeton University Press, 2006). 56. Baruch Spinoza, Tractatus Theologico-Politicus (1670), cited in Landemore, Democratic Reason, 67. 57. James Surowiecki, The Wisdom of Crowds: Why the Many are Smarter than the Few (London: Abacus, 2005). 58. Landemore, Democratic Reason, 157. 59. Jürgen Habermas, cited in Landemore, Democratic Reason, xvii; see also Landemore, Democratic Reason, 97. 60. Tocqueville, Democracy in America, 70. 61. Rousseau, Social Contract, 64. 62. Landemore, Democratic Reason, xv–xvii. Chapter 13 1. See generally Jürgen Habermas, Between Facts and Norms (Cambridge: Polity Press in association with Oxford: Basil Blackwell, 2010).


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Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries by Safi Bahcall

accounting loophole / creative accounting, Albert Einstein, Apple II, Apple's 1984 Super Bowl advert, Astronomia nova, British Empire, Cass Sunstein, Charles Lindbergh, Clayton Christensen, cognitive bias, creative destruction, disruptive innovation, diversified portfolio, double helix, Douglas Engelbart, Douglas Engelbart, Edmond Halley, Gary Taubes, hypertext link, invisible hand, Isaac Newton, Johannes Kepler, Jony Ive, knowledge economy, lone genius, Louis Pasteur, Mark Zuckerberg, Menlo Park, Mother of all demos, Murray Gell-Mann, PageRank, Peter Thiel, Philip Mirowski, Pierre-Simon Laplace, prediction markets, pre–internet, Ralph Waldo Emerson, RAND corporation, random walk, Richard Feynman, Richard Thaler, side project, Silicon Valley, six sigma, Solar eclipse in 1919, stem cell, Steve Jobs, Steve Wozniak, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tim Cook: Apple, tulip mania, Wall-E, wikimedia commons, yield management

Bush’s goal: that the US should be the initiator, not the victim, of innovative surprise. What Bush did, and why he did it, came right back to one of those eight greatest ideas of physics: phase transitions. In this book, I’ll show you how the science of phase transitions suggests a surprising new way of thinking about the world around us—about the mysteries of group behavior. We will see why good teams will kill great ideas, why the wisdom of crowds becomes the tyranny of crowds when the stakes are high, and why the answers to these questions can be found in a glass of water. I’ll describe the science briefly (skipping the boring stuff). And then we’ll see how small changes in structure, rather than culture, can transform the behavior of groups, the same way a small change in temperature can transform rigid ice to flowing water. Which will give all of us the tools to become the initiators, not the victims, of innovative surprise.

* * * Loonshot Franchise Widely dismissed or ridiculed idea 1922 A 12-year-old patient with diabetes is treated with ground-up pancreas extract Insulin 1935 An 80-pound payload is accelerated to 500 miles per hour through rocket propulsion Long-range ballistic missiles 1961 A 32-year-old former milk-truck driver plays a metrosexual British spy who saves the world James Bond 1976 A script titled The Adventures of Luke Starkiller is green-lit Star Wars Phase transition Sudden transformation in system behavior, as one or more control parameters cross a critical threshold Water From liquid to solid, as temperature decreases Cars on highways From smooth flow to jammed flow, as car density increases Fires in forests From contained to uncontrolled, as wind speed increases Individuals in companies From a focus on loonshots to a focus on careers, as size of company increases * * * Which brings us to the importance of being emergent—or, at least, understanding emergence. It can help us capture the benefits of diversity while reducing the risk of collective disasters. We want to benefit from the wisdom of crowds while reducing the risk of market crashes. We want to benefit from a plurality of beliefs while reducing the risk of religious wars. Over the coming chapters, we will apply Boyle-style science to help us understand the collective behaviors of individuals in companies, much as Smith applied Boyle-style science (not Newton-style) to help us understand the collective behaviors of individuals in markets.

A mechanical elephant to carry military equipment through the jungles of Vietnam. A superbomb made from the element hafnium, discovered, allegedly, by a physicist experimenting with a dental x-ray machine. A plan for achieving nuclear fusion through rapidly collapsing bubbles inside liquids (a modified cleaning fluid was used). A prediction market where investors could bet on the location of the next terrorist event, in order to tap into the “wisdom of crowds.” (The project was scrapped for what might be called bad taste.) Other DARPA loonshots have transformed industries or created new academic disciplines. The early computer network ARPANET evolved into the internet. A satellite-based geolocation system evolved first into military GPS, then the consumer GPS used in nearly every car and smartphone. A project to assist soldiers with software that could understand voice commands spun out Siri, now found in every iPhone.


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

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, disruptive innovation, Douglas Engelbart, Douglas Engelbart, drone strike, Edward Glaeser, Edward Thorp, en.wikipedia.org, experimental subject, Filter Bubble, Freestyle chess, Galaxy Zoo, Google Earth, Google Glasses, Gunnar Myrdal, Henri Poincaré, hindsight bias, hive mind, Howard Rheingold, information retrieval, iterative process, jimmy wales, Kevin Kelly, Khan Academy, knowledge worker, lifelogging, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Netflix Prize, Nicholas Carr, Panopticon Jeremy Bentham, patent troll, pattern recognition, pre–internet, Richard Feynman, Ronald Coase, Ronald Reagan, Rubik’s Cube, sentiment analysis, Silicon Valley, Skype, Snapchat, Socratic dialogue, spaced repetition, superconnector, 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: 281 words: 71,242

World Without Mind: The Existential Threat of Big Tech by Franklin Foer

artificial general intelligence, back-to-the-land, Berlin Wall, big data - Walmart - Pop Tarts, big-box store, Buckminster Fuller, citizen journalism, Colonization of Mars, computer age, creative destruction, crowdsourcing, data is the new oil, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Douglas Engelbart, Edward Snowden, Electric Kool-Aid Acid Test, Elon Musk, Fall of the Berlin Wall, Filter Bubble, global village, Google Glasses, Haight Ashbury, hive mind, income inequality, intangible asset, Jeff Bezos, job automation, John Markoff, Kevin Kelly, knowledge economy, Law of Accelerating Returns, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, means of production, move fast and break things, move fast and break things, new economy, New Journalism, Norbert Wiener, offshore financial centre, PageRank, Peace of Westphalia, Peter Thiel, planetary scale, Ray Kurzweil, self-driving car, Silicon Valley, Singularitarianism, software is eating the world, Steve Jobs, Steven Levy, Stewart Brand, strong AI, supply-chain management, the medium is the message, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas L Friedman, Thorstein Veblen, Upton Sinclair, Vernor Vinge, Whole Earth Catalog, yellow journalism

High-profile devotees of Ayn Rand can be found there. But if you listen hard to the titans of tech, that’s not the worldview that emerges. In fact, it is something much closer to the opposite of a libertarian’s veneration of the heroic, solitary individual. The big tech companies believe we’re fundamentally social beings, born to collective existence. They invest their faith in the network, the wisdom of crowds, collaboration. They harbor a deep desire for the atomistic world to be made whole. By stitching the world together, they can cure its ills. Rhetorically, the tech companies gesture toward individuality—to the empowerment of the “user”—but their worldview rolls over it. Even the ubiquitous invocation of users is telling, a passive, bureaucratic description of us. The big tech companies—the Europeans have charmingly, and correctly, lumped them together as GAFA (Google, Apple, Facebook, Amazon)—are shredding the principles that protect individuality.

It presented itself an antidote to the old Acela Corridor establishment, which it accused of condescending to the masses and zealously guarding its own prerogatives at everyone else’s expense. Facebook was hailed as a mechanism that would help diminish the importance of clubbable gasbag pundits; Amazon would bust up the cartel of effete New York book publishers. This critique was not purely an exercise in denunciation. It was coupled with an alternative vision of society, a vision of amateurs producing knowledge for the joy of it, a faith in the wisdom of crowds. Silicon Valley views its role in history as that of the disruptive agent that shatters the grip of the sclerotic, self-perpetuating mediocrity that constitutes the American elite. On the surface, the tech companies seem aware of the danger that they might repeat the sins of the very cohort they critique. After Silicon Valley supplies its users with tools to make decisions for themselves, it claims to step out of the way and recede unassumingly.


pages: 387 words: 119,409

Work Rules!: Insights From Inside Google That Will Transform How You Live and Lead by Laszlo Bock

Airbnb, Albert Einstein, AltaVista, Atul Gawande, Black Swan, book scanning, Burning Man, call centre, Cass Sunstein, Checklist Manifesto, choice architecture, citizen journalism, clean water, correlation coefficient, crowdsourcing, Daniel Kahneman / Amos Tversky, deliberate practice, en.wikipedia.org, experimental subject, Frederick Winslow Taylor, future of work, Google Earth, Google Glasses, Google Hangouts, Google X / Alphabet X, Googley, helicopter parent, immigration reform, Internet Archive, longitudinal study, Menlo Park, mental accounting, meta analysis, meta-analysis, Moneyball by Michael Lewis explains big data, nudge unit, PageRank, Paul Buchheit, Ralph Waldo Emerson, Rana Plaza, random walk, Richard Thaler, Rubik’s Cube, self-driving car, shareholder value, side project, Silicon Valley, six sigma, statistical model, Steve Ballmer, Steve Jobs, Steven Levy, Steven Pinker, survivorship bias, TaskRabbit, The Wisdom of Crowds, Tony Hsieh, Turing machine, winner-take-all economy, Y2K

They combine two things that should be completely separate: performance evaluation and people development. Evaluation is necessary to distribute finite resources, like salary increases or bonus dollars. Development is just as necessary so people grow and improve.”121 If you want people to grow, don’t have those two conversations at the same time. Make development a constant back-and-forth between you and your team members, rather than a year-end surprise. The wisdom of crowds… it’s not just for recruiting anymore! We learned in chapter 5 that we make better hiring decisions about potential employees by relying on input from a crowd of people. The same principle holds for coaching and evaluating existing employees.122 Going back to my team member Sam, I saw only a portion of his work, so he legitimately could argue that I didn’t understand the full context of his performance.

Often your boss makes the call, or you transfer into a new job and get a fancy new title. At Google it doesn’t quite work that way. By now you’ll guess that promotion decisions, like rating decisions, are made by committees. They review people who are up for promotion and calibrate them against promoted people from prior years and well-defined standards, to ensure fairness. And it wouldn’t be Google if we didn’t also rely on the wisdom of crowds. Peer feedback is an essential part of the technical promotion packet that committees review. There’s just one other twist. Googlers working in engineering or product management can nominate themselves for promotion.xlv Interestingly enough, we found that women are less likely to nominate themselves for promotion, but that when they do, they are promoted at slightly higher rates than men.

xxx For example, Scott Page of the University of Michigan has shown that averaging the guesses of President Obama’s finance team about what financial markets will do is more accurate than the analysis put out by a small group of economists at the Federal Reserve. On Who Wants to Be a Millionaire, asking the audience gets you the right answer 95 percent of the time, according to former host Regis Philbin. And Google’s PageRank, an algorithm that prioritizes search results, relies heavily on the wisdom of crowds. xxxi Culture here refers specifically to the attributes described earlier in the chapter, including conscientiousness, comfort with ambiguity, etc. It’s also about broadening the kinds of people who work at Google and avoiding homogeneity. xxxii These are called “exploding offers” because the offer goes away (explodes) if not accepted by a certain date. They are common in college hiring, but are showing up more and more in Silicon Valley.


pages: 312 words: 93,504

Common Knowledge?: An Ethnography of Wikipedia by Dariusz Jemielniak

Andrew Keen, barriers to entry, Benevolent Dictator For Life (BDFL), citation needed, collaborative consumption, collaborative editing, conceptual framework, continuous integration, crowdsourcing, Debian, deskilling, digital Maoism, en.wikipedia.org, Filter Bubble, Google Glasses, Guido van Rossum, 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, selection bias, Silicon Valley, Skype, slashdot, social software, Stewart Brand, The Hackers Conference, The Nature of the Firm, The Wisdom of Crowds, transaction costs, WikiLeaks, wikimedia commons, zero-sum game

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).


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

"Robert Solow", Alvin Roth, 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, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, do-ocracy, 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, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, 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, Vilfredo Pareto, 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.


Adam Smith: Father of Economics by Jesse Norman

"Robert Solow", active measures, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

The selling mechanism is generally a single sale price as in supermarkets, not the bid–offer spreads seen on foreign exchange kiosks at airports, or one of a large range of other possible price mechanisms. On the whole, these markets work in the way canonically attributed to Smith on the model of the so-called ‘invisible hand’, with supply and demand tending towards competitive equilibrium, and they work extremely well. Another way of thinking of these markets is that they exhibit what has become known as the ‘wisdom of crowds’, and they do so because they satisfy four conditions: those involved are diverse in their access to information and in their opinions; they are independent, each person exercising his or her own view and not deferring to others; they are decentralized, so that they can specialize or draw on local knowledge; and there is a means—a market mechanism—to aggregate or gather their private judgements or choices together into a collective decision.

., n.p. 1800 Smith, Craig, Adam Smith’s Political Philosophy, Routledge 2013 Smith, Vernon, Rationality in Economics: Constructivist and Ecological Forms, Cambridge University Press 2008 Smout, T. C., A History of the Scottish People 1560–1830, William Collins 1999 Steuart, Sir James, An Inquiry into the Principles of Political Economy, ed. Andrew Skinner, Oliver & Boyd 1966 Stiglitz, Joseph E., Globalisation and its Discontents Revisited, Penguin Books 2017 Stiglitz, Joseph E., The Price of Inequality, Penguin Books 2012 Surowiecki, James, The Wisdom of Crowds, Doubleday Books 2004 Szechi, Daniel, The Jacobites: Britain and Europe 1688–1788, Manchester University Press 1994 Taleb, Nassim Nicholas, The Black Swan, Random House 2007 Tavris, Carol and Elliot Aronson, Mistakes Were Made (But Not by Me), Mariner Books 2015 Thompson, Harold, A Scottish Man of Feeling: Some Account of Henry Mackenzie… and of the Golden Age of Burns and Scott, Oxford University Press 1931 Tirole, Jean, Economics for the Common Good, Princeton University Press 2017 Tytler, Alexander Fraser, Lord Woodhouselee, Memoirs of the Life and Writings of the Honourable Henry Home of Kames, T.

In other words, market failure is endemic, and can never be the sole justification for policy interventions; and there can be no escape through economic theory from the need for political economy. I am very grateful to Tim Besley for this point; see especially his ‘The New Political Economy’, Economic Journal, 117.524, 2007. See also Roman Frydman and Michael D. Goldberg, Imperfect Knowledge Economics, Princeton University Press 2007 Wisdom of crowds: cf. James Surowiecki, The Wisdom of Crowds, Doubleday Books 2004 Veblen goods: see Thorstein Veblen, The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions, Macmillan 1899. In his essay on the imitative arts (in EPS) Smith memorably analyses the phenomenon of topiary in Veblenian terms: ‘It was some years ago the fashion to ornament a garden with yew and holly trees, clipped into the artificial shapes of pyramids, and columns, and vases, and obelisks.


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

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, commoditize, computer age, Computer Numeric Control, computer vision, conceptual framework, corporate governance, creative destruction, crowdsourcing, Daniel Kahneman / Amos Tversky, death of newspapers, disintermediation, Douglas Hofstadter, en.wikipedia.org, Erik Brynjolfsson, Filter Bubble, 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, lifelogging, lump of labour, Marshall McLuhan, Metcalfe’s law, Narrative Science, natural language processing, Network effects, optical character recognition, Paul Samuelson, personalized medicine, pre–internet, Ray Kurzweil, Richard Feynman, Second Machine Age, self-driving car, semantic web, Shoshana Zuboff, Skype, social web, speech recognition, spinning jenny, strong AI, supply-chain management, telepresence, The Future of Employment, 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!, WikiLeaks, 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).


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Model Thinker: What You Need to Know to Make Data Work for You by Scott E. Page

"Robert Solow", Airbnb, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Alvin Roth, assortative mating, Bernie Madoff, bitcoin, Black Swan, blockchain, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Checklist Manifesto, computer age, corporate governance, correlation does not imply causation, cuban missile crisis, deliberate practice, discrete time, distributed ledger, en.wikipedia.org, Estimating the Reproducibility of Psychological Science, Everything should be made as simple as possible, experimental economics, first-price auction, Flash crash, Geoffrey West, Santa Fe Institute, germ theory of disease, Gini coefficient, High speed trading, impulse control, income inequality, Isaac Newton, John von Neumann, Kenneth Rogoff, knowledge economy, knowledge worker, Long Term Capital Management, loss aversion, low skilled workers, Mark Zuckerberg, market design, meta analysis, meta-analysis, money market fund, Nash equilibrium, natural language processing, Network effects, p-value, Pareto efficiency, pattern recognition, Paul Erdős, Paul Samuelson, phenotype, pre–internet, prisoner's dilemma, race to the bottom, random walk, randomized controlled trial, Richard Feynman, Richard Thaler, school choice, sealed-bid auction, second-price auction, selection bias, six sigma, social graph, spectrum auction, statistical model, Stephen Hawking, Supply of New York City Cabdrivers, The Bell Curve by Richard Herrnstein and Charles Murray, The Great Moderation, The Rise and Fall of American Growth, the rule of 72, the scientific method, The Spirit Level, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, urban sprawl, value at risk, web application, winner-take-all economy, zero-sum game

Even if both predict values that are too high, the error of the average of those predictions will still not be worse than the average error of the two high predictions. The theorem does not imply that any collection of diverse models will be accurate. If all of the models share a common bias, their average will also contain that bias. The theorem does imply that any collection of diverse models (or people) will be more accurate than its average member, a phenomenon referred to as the wisdom of crowds. That mathematical fact explains the success of ensemble methods in computer science that average multiple classifications as well as evidence that individuals who think using multiple models and frameworks predict with higher accuracy than people who use single models. Any single way of looking at the world leaves out details and makes us prone to blind spots. Single-model thinkers are less likely to anticipate large events, such as market collapses or the Arab Spring of 2011.3 These two theorems make a compelling case for using many models, at least in the context of prediction.

In point of fact, the correlations in performance could result from similarities in investment portfolios as well as one bank holding assets in another. 15 See Geithner 2014. 16 See Weisberg 2012 for a description of the San Francisco Bay model and its usefulness in policy. 17 See Stone et al. 2014 for a full account. 18 I thank Josh Epstein for the first example. 19 See Dunne 1999 and Raby 2001. Chapter 3: The Science of Many Models 1 Levins 1966. 2 See Page 2007, 2017 for more detailed descriptions and derivation. 3 See Suroweicki 2006 on the wisdom of crowds; Tetlock 2005 on how foxes outperform hedgehogs; Kalyvas 1999 on the failure of political science to predict the fall of the Soviet Union; and Patel et al. 2011 on ensemble methods in computer science. 4 Hong and Page 2009 show that independent models require a unique set of categorizations. That is, there exists only one way to create a set of independent predictions in a binary category model. 5 See three of my earlier books—The Difference (Page 2008), Diversity and Complexity (Page 2010), and The Diversity Bonus (Page 2017)—for elaboration on the diversity prediction theorem.

“Search for the Wreckage of Air France Flight AF 447.” Statistical Science 29, no. 1: 69–80. Storchmann, Karl. 2011. “Wine Economics: Emergence, Developments, Topics.” Agrekon 50, no. 3: 1–28. Suki, Bela, and Urs Frey. 2017. “A Time Varying Biased Random Walk Model of Growth: Application to Height from Birth to Childhood.” Journal of Critical Care 38: 362–370. Suroweicki, James. 2006. The Wisdom of Crowds. New York: Anchor Press. Syverson, Chad. 2007. “Prices, Spatial Competition, and Heterogeneous Producers: An Empirical Test.” Journal of Industrial Economics 55, no. 2: 197–222. Taleb, Nassim. 2001. Fooled by Randomness. New York: Random House. Taleb, Nassim. 2007. The Black Swan: The Impact of the Highly Improbable. New York: Random House. Taleb, Nassim. 2012. Antifragile: Things That Gain from Disorder.


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Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry by David Robertson, Bill Breen

barriers to entry, business process, Clayton Christensen, creative destruction, crowdsourcing, Dean Kamen, disruptive innovation, financial independence, game design, global supply chain, Jeff Bezos, Kickstarter, Mark Zuckerberg, Minecraft, Rubik’s Cube, Silicon Valley, Steve Jobs, The Wisdom of Crowds, Wall-E

Afterward, an overjoyed group of Darwinites gathered with LEGO execs for dinner. “Kjeld stood up and told us, ‘You people are the future of the company,’ ” remembered Tveskov. “And we totally believed him.” Foster open innovation—heed the wisdom of the crowd. During the first years of the past decade, the heaving growth of massive online communities inspired books such as Open Innovation, Wikinomics, and The Wisdom of Crowds, which showed how creative companies were harnessing the collective genius of virtual communities to spur innovation and growth. LEGO, a conservative company whose numerous battles over patent infringements had made it hyperprotective of its intellectual property, certainly did not rush into the crowdsourcing craze. But LEGO did take some tentative first steps. For much of its history, LEGO was a monolith—a massively intractable organization that viewed its fans solely as consumers, never as cocreators.

“It was obviously relevant to engage them,” said Nipper. “They knew stuff that we didn’t.” So began the LEGO Group’s disciplined bid to amplify one of the past decade’s most talked-about business innovations—tapping the “wisdom of the crowd” to create breakthrough products. Keep in mind that LEGO launched its experiment with crowdsourcing in 2004, a full year before James Surowiecki came out with his groundbreaking book The Wisdom of Crowds, in which he posited that because groups of people are “often smarter than the smartest people in them,” a crowd’s “collective intelligence” will produce better outcomes than a small group of experts. Since the publication of that and other books on customer cocreation, initiatives ranging from LINUX to Wikipedia to more than 240,000 open-source software development projects (according to SourceForge.net) have amply demonstrated that crowdsourcing opens an organization up to a broad swath of insights and ideas that it could never muster by itself.


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

Andrew Keen, Berlin Wall, bioinformatics, Brewster Kahle, c2.com, Charles Lindbergh, 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, Joi Ito, Kuiper Belt, liberation theology, Mahatma Gandhi, means of production, Merlin Mann, Metcalfe’s law, Nash equilibrium, Network effects, Nicholas Carr, Picturephone, place-making, Pluto: dwarf planet, prediction markets, price mechanism, prisoner's dilemma, profit motive, Richard Stallman, Robert Metcalfe, 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, Vilfredo Pareto, 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).


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

Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business cycle, 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, creative destruction, 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, John Markoff, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, lateral thinking, liberal capitalism, Malacca Straits, Mark Zuckerberg, market bubble, mass immigration, 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, Paul Samuelson, 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 Future of Employment, 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.


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

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, buy and hold, 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, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, 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, zero-sum game

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: 354 words: 99,690

Thinking About It Only Makes It Worse: And Other Lessons From Modern Life by David Mitchell

bank run, Boris Johnson, British Empire, cognitive dissonance, collapse of Lehman Brothers, credit crunch, don't be evil, double helix, Downton Abbey, Etonian, eurozone crisis, haute cuisine, Julian Assange, lateral thinking, Northern Rock, offshore financial centre, payday loans, plutocrats, Plutocrats, profit motive, sensible shoes, Skype, The Wisdom of Crowds, WikiLeaks

I reckon almost everyone gets why pop stars and footballers are often rich: millions of people are willing to pay significant amounts of money to watch them do their thing. It’s very easy to see where that money comes from and, if you don’t like Stoke City or Lady Gaga, you don’t have to contribute yourself. But, when it comes to financial services executives, I agree with Howe that this lack of understanding exists – but I don’t agree that it’s a problem. I think it’s a good thing. I think it’s the product of the wisdom of crowds. People don’t understand why bank and building society executives are so highly paid simply because there is no adequate explanation. It’s an anomaly which, practically speaking, could only be corrected by the very people who benefit from it. That is a key failing with the current financial system. The Nationwide AGM was up in arms over these remuneration packages, yet only 9% of the society’s members failed to approve them.

This was the end of a long battle for Joanna Langfield to restore The Good Life’s good name in the face of a hate barrage that had caused a 25% slump in the restaurant’s profits. One can readily see Langfield’s problem. When a restaurant owner approaches a website to ask for some negative reviews to be removed, saying they’re biased, the claim is going to be viewed with scepticism – in the unlikely event that the website has any staff to view it at all. Online reviews, either anonymous or with no verifiable name, customarily go up unchallenged. We assume that the wisdom of crowds will ensure that a fair impression is given overall – that the uncensored self-expression of hundreds of millions will tend towards the truth. Half the time it just regresses to the mean. And the rest of the time it goes the other way: overeffusive, hysterical praise. So often you’ll read a review that couldn’t be bettered if the hotelier, restaurateur, musician, bar owner or author had written it themselves.


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

Albert Einstein, bank run, banking crisis, battle of ideas, Black Swan, call centre, carbon footprint, cashless society, citizen journalism, commoditize, 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 pandemic, global supply chain, global village, hive mind, industrial robot, invention of the telegraph, Jaron Lanier, Jeff Bezos, knowledge economy, lateral thinking, linked data, low cost airline, low skilled workers, M-Pesa, mass immigration, 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: 317 words: 100,414

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

Affordable Care Act / Obamacare, Any sufficiently advanced technology is indistinguishable from magic, availability heuristic, Black Swan, butterfly effect, buy and hold, cloud computing, cuban missile crisis, Daniel Kahneman / Amos Tversky, desegregation, drone strike, Edward Lorenz: Chaos theory, forward guidance, Freestyle chess, fundamental attribution error, germ theory of disease, hindsight bias, index fund, Jane Jacobs, Jeff Bezos, Kenneth Arrow, Laplace demon, longitudinal study, Mikhail Gorbachev, Mohammed Bouazizi, Nash equilibrium, Nate Silver, Nelson Mandela, obamacare, pattern recognition, performance metric, Pierre-Simon Laplace, place-making, placebo effect, prediction markets, quantitative easing, random walk, randomized controlled trial, Richard Feynman, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, scientific worldview, 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, Thomas Bayes, 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: 123 words: 32,382

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

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: 437 words: 105,934

#Republic: Divided Democracy in the Age of Social Media by Cass R. Sunstein

A Declaration of the Independence of Cyberspace, affirmative action, Affordable Care Act / Obamacare, Bernie Sanders, Cass Sunstein, choice architecture, Donald Trump, drone strike, Erik Brynjolfsson, Filter Bubble, friendly fire, global village, illegal immigration, immigration reform, income inequality, Jane Jacobs, loss aversion, Mark Zuckerberg, obamacare, prediction markets, road to serfdom, Ronald Reagan, Silicon Valley, Skype, Snapchat, stem cell, The Chicago School, The Death and Life of Great American Cities, The Wisdom of Crowds, WikiLeaks

Notably, people in the study received monetary payments for getting the right answer, so their mistakes were really mistakes—not an effort to curry favor with others. The authors conclude that for decision makers, the advice given by a group “may be thoroughly misleading, because closely related, seemingly independent advice may pretend certainty despite substantial deviations from the correct solution.”22 There’s a lesson there for the wisdom of crowds in online settings. Because people are interacting with one another, they might not be so wise. SEGREGATION, MIGRATION, AND INTEGRATION The Daily Me is not a lived reality, at least for most of us. Facebook, Twitter, Instagram, and Snapchat accounts can certainly spread diverse points of view, and many people use them in exactly that way. Facts and opinions on liberal sites often migrate to conservative sites, and vice versa.

For a vivid popular treatment, see Malcolm Gladwell, The Tipping Point: How Little Things Can Make a Big Difference (New York: Little, Brown and Company, 2000). 16.See Lisa Anderson and Charles Holt, “Information Cascades in the Laboratory,” American Economic Review 87, no. 5 (1997): 847–62. 17.For a discussion of some of these examples, see ibid.; Granovetter, “Threshold Models,” 1422–24. 18.Lev Muchnik, Sinan Aral, and Sean J. Taylor, “Social Influence Bias: A Randomized Experiment,” Science 341, no. 6146 (2013): 647–51. 19.Ibid., 650. 20.See Jan Lorenz, Heiko Rauhut, Frank Schweitzer, and Dirk Helbing, “How Social Influences Can Undermine the Wisdom of Crowd Effect,” Proceedings of the National Academy of Sciences 108, no. 22 (2011): 9020–25. 21.See ibid. Note, however, that even with diminished diversity, the crowd was still somewhat more accurate than a typical individual. This is a “soft” result, as the conclusion depends on the statistics used to analyze the data, but overall, groups were still wiser than individuals, though not always at conventional levels of statistical significance. 22.Ibid., 9024. 23.See R.


pages: 370 words: 107,983

Rage Inside the Machine: The Prejudice of Algorithms, and How to Stop the Internet Making Bigots of Us All by Robert Elliott Smith

Ada Lovelace, affirmative action, AI winter, Alfred Russel Wallace, Amazon Mechanical Turk, animal electricity, autonomous vehicles, Black Swan, British Empire, cellular automata, citizen journalism, Claude Shannon: information theory, combinatorial explosion, corporate personhood, correlation coefficient, crowdsourcing, Daniel Kahneman / Amos Tversky, desegregation, discovery of DNA, Douglas Hofstadter, Elon Musk, Fellow of the Royal Society, feminist movement, Filter Bubble, Flash crash, Gerolamo Cardano, gig economy, Gödel, Escher, Bach, invention of the wheel, invisible hand, Jacquard loom, Jacques de Vaucanson, John Harrison: Longitude, John von Neumann, Kenneth Arrow, low skilled workers, Mark Zuckerberg, mass immigration, meta analysis, meta-analysis, mutually assured destruction, natural language processing, new economy, On the Economy of Machinery and Manufactures, p-value, pattern recognition, Paul Samuelson, performance metric, Pierre-Simon Laplace, precariat, profit maximization, profit motive, Silicon Valley, social intelligence, statistical model, Stephen Hawking, stochastic process, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Future of Employment, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Malthus, traveling salesman, Turing machine, Turing test, twin studies, Vilfredo Pareto, Von Neumann architecture, women in the workforce

Back in 1987, the Pew Research Center reported that trust in the US government was around 50 per cent.2 Today it stands at under 20 per cent. Gallup also reports drops in confidence versus historical averages for institutions as varied as banking, criminal justice, medicine, organized labour, big business, police, print media, broadcast media, public schools and organized religion.3 Meanwhile, faith in the opinion of the masses is soaring. What was once derided as ‘lowest common denominator’ is now hailed ‘the wisdom of crowds’. This ‘wisdom’ isn’t only being exploited by populist politicians; it is the life blood of today’s AI. The fact that expertise proved hard to fathom for expert systems is exactly what led to the AI winter. Since then there have been no significant technical breakthroughs on modelling how smart people reason. While modelling the reasoning process of a single human expert proved overwhelmingly expensive, the Internet heralded in a new era whereby the great mass of people in the emergent online world offered up a sea of information for free; and, in many cases, even paid (sometimes explicitly, but largely through subscriptions and views of advertising) to have their data monitored and mined.

As Mickey said, ‘A bookie sets the odds to get what he needs … And trust me, the bettors have no idea about the probabilities.’ 4 Scientific Pride and Prejudice 50,000,000 Elvis fans can’t be wrong. Album cover, spotted at Floyd’s Live Catfish, 1984 Given the cold computational underpinning of AI, there is a widespread assumption that algorithmic decision-making is objective and without bias. With big data analysis, this assumption has become married to the ‘wisdom of crowds’. Like those Elvis fans, there is a feeling that a great mass of people (or conclusions based on great masses of people) can’t be wrong, if unbiased algorithms are mining their statistics. Such population-based conclusions can only cause society to positively evolve. In many areas of society – policing, defence, law, education, health, childcare, transport and the media – this implicit belief has led to billions being invested in research and development for the application of big data analytics (US$20–30 billion in 2017, according to McKinsey1).


pages: 122 words: 38,022

Kill All Normies: Online Culture Wars From 4Chan and Tumblr to Trump and the Alt-Right by Angela Nagle

4chan, A Declaration of the Independence of Cyberspace, affirmative action, anti-communist, battle of ideas, Bernie Sanders, bitcoin, citizen journalism, crony capitalism, death of newspapers, Donald Trump, feminist movement, game design, Hacker Ethic, hive mind, Julian Assange, Kickstarter, mass immigration, moral panic, Nelson Mandela, Norman Mailer, Occupy movement, open borders, post-industrial society, pre–internet, Ronald Reagan, sexual politics, Silicon Valley, The Wisdom of Crowds, WikiLeaks

Compare the first election won by Obama, in which social media devotees reproduced the iconic but official blue-and-red stylized stencil portrait of the new president with HOPE printed across the bottom, a portrait created by artist Shepard Fairey and approved by the official Obama campaign, to the bursting forth of irreverent mainstream-baffling meme culture during the last race, in which the Bernie’s Dank Meme Stash Facebook page and The Donald subreddit defined the tone of the race for a young and newly politicized generation, with the mainstream media desperately trying to catch up with a subcultural in-joke style to suit two emergent anti-establishment waves of the right and left. Writers like Manuel Castells and numerous commentators in the Wired magazine milieu told us of the coming of a networked society, in which old hierarchical models of business and culture would be replaced by the wisdom of crowds, the swarm, the hive mind, citizen journalism and user-generated content. They got their wish, but it’s not quite the utopian vision they were hoping for. As old media dies, gatekeepers of cultural sensibilities and etiquette have been overthrown, notions of popular taste maintained by a small creative class are now perpetually outpaced by viral online content from obscure sources, and culture industry consumers have been replaced by constantly online, instant content producers.


pages: 402 words: 110,972

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

AI winter, algorithmic trading, asset allocation, banking crisis, barriers to entry, Big bang: deregulation of the City of London, business cycle, butter production in bangladesh, butterfly effect, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, citizen journalism, collateralized debt obligation, corporate governance, Craig Reynolds: boids flock, creative destruction, 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, fixed income, Gordon Gekko, implied volatility, index arbitrage, index fund, information retrieval, intangible asset, Internet Archive, John Nash: game theory, Kenneth Arrow, 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, Metcalfe’s law, moral hazard, mutually assured destruction, Myron Scholes, natural language processing, negative equity, 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, risk tolerance, risk-adjusted returns, risk/return, Robert Metcalfe, Ronald Reagan, Rubik’s Cube, 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, your tax dollars at work

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.


pages: 377 words: 115,122

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

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, longitudinal study, Mahatma Gandhi, mass immigration, Menlo Park, meta analysis, meta-analysis, Mikhail Gorbachev, Nelson Mandela, new economy, popular electronics, Ralph Waldo Emerson, ride hailing / ride sharing, Rosa Parks, selective serotonin reuptake inhibitor (SSRI), shareholder value, Silicon Valley, Steve Jobs, Steve Wozniak, telemarketer, The Wisdom of Crowds, traveling salesman, twin studies, 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: 829 words: 186,976

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

"Robert Solow", airport security, availability heuristic, Bayesian statistics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Swan, Broken windows theory, business cycle, buy and hold, 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, global pandemic, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), 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, Laplace demon, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, negative equity, new economy, Norbert Wiener, PageRank, pattern recognition, pets.com, Pierre-Simon Laplace, 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 Bayes, 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.


pages: 471 words: 124,585

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

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, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, 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, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, negative equity, Nelson Mandela, Nick Leeson, Northern Rock, Parag Khanna, 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, stocks for the long run, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, undersea cable, 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.


pages: 538 words: 141,822

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

"Robert Solow", 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 Markoff, John von Neumann, Marshall McLuhan, Mitch Kapor, Naomi Klein, Network effects, new economy, New Urbanism, Panopticon Jeremy Bentham, peer-to-peer, 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: 505 words: 142,118

A Man for All Markets by Edward O. Thorp

3Com Palm IPO, Albert Einstein, asset allocation, beat the dealer, Bernie Madoff, Black Swan, Black-Scholes formula, Brownian motion, buy and hold, buy low sell high, carried interest, Chuck Templeton: OpenTable:, Claude Shannon: information theory, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Edward Thorp, Erdős number, Eugene Fama: efficient market hypothesis, financial innovation, George Santayana, German hyperinflation, Henri Poincaré, high net worth, High speed trading, index arbitrage, index fund, interest rate swap, invisible hand, Jarndyce and Jarndyce, Jeff Bezos, John Meriwether, John Nash: game theory, Kenneth Arrow, Livingstone, I presume, Long Term Capital Management, Louis Bachelier, margin call, Mason jar, merger arbitrage, Murray Gell-Mann, Myron Scholes, NetJets, Norbert Wiener, passive investing, Paul Erdős, Paul Samuelson, Pluto: dwarf planet, Ponzi scheme, price anchoring, publish or perish, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, RFID, Richard Feynman, risk-adjusted returns, Robert Shiller, Robert Shiller, rolodex, Sharpe ratio, short selling, Silicon Valley, Stanford marshmallow experiment, statistical arbitrage, stem cell, stocks for the long run, survivorship bias, The Myth of the Rational Market, The Predators' Ball, the rule of 72, The Wisdom of Crowds, too big to fail, Upton Sinclair, value at risk, Vanguard fund, Vilfredo Pareto, Works Progress Administration

The Ned polling method works remarkably well in certain situations, like guessing the number of beans in a barrel, or the weight of a pumpkin. The average of all the guesses by the crowd is typically much better than most of the individual guesses. This phenomenon has been called the wisdom of crowds. But like most simplifications, this has a flip side, as in the Madoff case. Here there were just two answers, fraudster or investment genius. The crowd voted for investment genius and got it wrong. I call the flip side to the wisdom of crowds the lunacy of lemmings. By 1991, I had simplified to a staff of four people. Steve Mizusawa was hedging Japanese warrants, with some assistance from me. I was also managing a portfolio of hedge funds for myself, with help from Judy McCoy. She was in charge of tax and financial reporting, helped Steve, and backed up our office manager.


pages: 165 words: 50,798

Intertwingled: Information Changes Everything by Peter Morville

A Pattern Language, Airbnb, Albert Einstein, Arthur Eddington, augmented reality, Bernie Madoff, Black Swan, business process, Cass Sunstein, cognitive dissonance, collective bargaining, disruptive innovation, index card, information retrieval, Internet of things, Isaac Newton, iterative process, Jane Jacobs, John Markoff, Lean Startup, Lyft, minimum viable product, Mother of all demos, Nelson Mandela, Paul Graham, peer-to-peer, RFID, Richard Thaler, ride hailing / ride sharing, Schrödinger's Cat, self-driving car, semantic web, sharing economy, Silicon Valley, Silicon Valley startup, source of truth, Steve Jobs, Stewart Brand, Ted Nelson, The Death and Life of Great American Cities, the scientific method, The Wisdom of Crowds, theory of mind, uber lyft, urban planning, urban sprawl, Vannevar Bush, zero-sum game

When we see everything through the lens of software and startups, we lose our peripheral vision. Information systems aren’t just code. They are also about content and culture. We must select our frame of reference very carefully, because the solution is shaped by how we define the problem. This step is often skipped by eager teams that are ready to roll. We’re in an era of imbalance where the wisdom of crowds drowns out individual insight. We need both. We should embrace teamwork, prototypes, feedback, iteration, but we must also engage experts in research, planning, and design. We all know what it’s like to learn the hard way. We never forget the time we touched the hot stove. Initially we learn by experience. But we soon realize the value of information and communication across space and time.


pages: 170 words: 49,193

The People vs Tech: How the Internet Is Killing Democracy (And How We Save It) by Jamie Bartlett

Ada Lovelace, Airbnb, Amazon Mechanical Turk, Andrew Keen, autonomous vehicles, barriers to entry, basic income, Bernie Sanders, bitcoin, blockchain, Boris Johnson, central bank independence, Chelsea Manning, cloud computing, computer vision, creative destruction, cryptocurrency, Daniel Kahneman / Amos Tversky, Dominic Cummings, Donald Trump, Edward Snowden, Elon Musk, Filter Bubble, future of work, gig economy, global village, Google bus, hive mind, Howard Rheingold, information retrieval, Internet of things, Jeff Bezos, job automation, John Maynard Keynes: technological unemployment, Julian Assange, manufacturing employment, Mark Zuckerberg, Marshall McLuhan, Menlo Park, meta analysis, meta-analysis, mittelstand, move fast and break things, move fast and break things, Network effects, Nicholas Carr, off grid, Panopticon Jeremy Bentham, payday loans, Peter Thiel, prediction markets, QR code, ransomware, Ray Kurzweil, recommendation engine, Renaissance Technologies, ride hailing / ride sharing, Robert Mercer, Ross Ulbricht, Sam Altman, Satoshi Nakamoto, Second Machine Age, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, smart cities, smart contracts, smart meter, Snapchat, Stanford prison experiment, Steve Jobs, Steven Levy, strong AI, TaskRabbit, technological singularity, technoutopianism, Ted Kaczynski, the medium is the message, the scientific method, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, ultimatum game, universal basic income, WikiLeaks, World Values Survey, Y Combinator

Chapter 2: The Global Village 1 Marshall McLuhan, The Gutenberg Galaxy: The Making of Typographic Man (University of Toronto Press, 1962). 2 Eric Norden, ‘The Playboy Interview: Marshall McLuhan’, Playboy, March 1969. 3 James Madison, ‘Federalist No. 10 – The Utility of the Union as a Safeguard Against Domestic Faction and Insurrection’, 23 November 1787. 4 Thomas Hawk, ‘How to unleash the wisdom of crowds’, www.theconversation.com, 9 February 2016. 5 See especially the following authors: Zeynep Tufekci, Eli Pariser and Evgeny Morozov. On ‘post-truth’, see books by Matthew D’Ancona, James Ball and Evan Davies. 6 Bruce Drake, ‘Six new findings about Millennials’, www.pewresearch.org, 7 March 2014. A survey repeatedly found that millennials have fewer institutional attachments than their parents, are more politically independent, but do ‘connect’ to personalised networks. 7 Daniel Kahneman, Thinking, Fast and Slow (Farrar, Straus and Giroux, 2011).


pages: 797 words: 227,399

Wired for War: The Robotics Revolution and Conflict in the 21st Century by P. W. Singer

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, Charles Lindbergh, clean water, Craig Reynolds: boids flock, cuban missile crisis, digital map, 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, Intergovernmental Panel on Climate Change (IPCC), 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, social intelligence, 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 Empathic Civilization: The Race to Global Consciousness in a World in Crisis by Jeremy Rifkin

agricultural Revolution, Albert Einstein, animal electricity, 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, hedonic treadmill, hydrogen economy, illegal immigration, income inequality, income per capita, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of movable type, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, Mahatma Gandhi, Marshall McLuhan, means of production, megacity, meta analysis, meta-analysis, Milgram experiment, Nelson Mandela, new economy, New Urbanism, Norbert Wiener, off grid, out of africa, Peace of Westphalia, peak oil, peer-to-peer, planetary scale, scientific worldview, Simon Kuznets, Skype, smart grid, smart meter, social intelligence, 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.


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

4chan, AGPL, 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, WikiLeaks

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: 509 words: 147,998

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

airport security, Albert Einstein, Columbine, game design, hive mind, out of africa, selective serotonin reuptake inhibitor (SSRI), Skype, Slavoj Žižek, social intelligence, 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: 629 words: 142,393

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

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, commoditize, corporate governance, Daniel Kahneman / Amos Tversky, disruptive innovation, 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, John Markoff, license plate recognition, loose coupling, mail merge, national security letter, old-boy network, packet switching, peer-to-peer, post-materialism, pre–internet, price discrimination, profit maximization, Ralph Nader, RFC: Request For Comment, RFID, Richard Stallman, Richard Thaler, risk tolerance, Robert Bork, 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, zero-sum game

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.


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

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, longitudinal study, mandatory minimum, Pierre-Simon Laplace, 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


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Consumed: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole by Benjamin R. Barber

addicted to oil, AltaVista, American ideology, Berlin Wall, Bertrand Russell: In Praise of Idleness, Bill Gates: Altair 8800, business cycle, Celebration, Florida, collective bargaining, creative destruction, David Brooks, delayed gratification, Donald Trump, double entry bookkeeping, G4S, game design, George Gilder, Gordon Gekko, greed is good, Hernando de Soto, illegal immigration, informal economy, invisible hand, Joseph Schumpeter, laissez-faire capitalism, late capitalism, liberal capitalism, Marc Andreessen, McJob, microcredit, Naomi Klein, new economy, New Journalism, Norbert Wiener, nuclear winter, Panopticon Jeremy Bentham, pattern recognition, presumed consent, profit motive, race to the bottom, Ralph Nader, road to serfdom, Robert Bork, Ronald Reagan, Saturday Night Live, Silicon Valley, spice trade, Steve Jobs, telemarketer, The Fortune at the Bottom of the Pyramid, the market place, The Wisdom of Crowds, Thomas L Friedman, Thorstein Veblen, trade route, X Prize

Consumer capitalism does not operate by producing self-conscious advocates of duplicity who render consciousness false by getting individuals to establish an unjust society they do not really want. Rather, it generates an ethos of schizophrenia that helps condition the attitudes and behavior it requires for its own survival. It fosters “me” thinking on the model of the narcissistic child and discourages “we” thinking of the kind deliberative grown-up citizens recognize as wisdom and that constitutes what James Surowiecki (business columnist for The New Yorker) has called “the wisdom of crowds”—a wisdom that rests on “diversity and independence” that allow “disagreement and contest.”22 Consumerism thus builds psychic monkey traps into its free-range marketplace. If the attitudes and behaviors that result turn out to undermine other important cultural values, which however are extraneous to capitalism’s concerns—however deeply relevant they may be to moral and spiritual frameworks and to the shaping of an ideal public culture—too bad.

Postwar Harvard political theorist Louis Hartz dismissed the Tocquevillian obsession with the tyranny of the majority by noting that the much maligned American majority “has been an amiable shepherd dog kept forever on a lion’s leash” (Louis Hartz, The Liberal Tradition in America: An Interpretation of American Political Thought Since the Revolution [New York: Harcourt, Brace, & Company, 1955], p. 129). 21. Lizabeth Cohen, A Consumers’ Republic: The Politics of Mass Consumption in Postwar America (New York: Alfred A. Knopf, 2003). 22. 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), p. xix. 23. Sigmund Freud, Civilization and Its Discontents (edited and translated by J. Strachey; New York: W. W. Norton, 1961), pp. 55, 59. Freud’s grand schematic no longer has much creditability in the fields of psychology and psychotherapy, but it remains useful as a cultural metaphor for the impact of repression, guilt, regression, and infantilization in political culture; that is to say, it offers what Freud calls “a pathology of cultural communities” that illuminates what I here am calling the infantilist ethos. 24.


pages: 579 words: 160,351

Breaking News: The Remaking of Journalism and Why It Matters Now by Alan Rusbridger

accounting loophole / creative accounting, Airbnb, banking crisis, Bernie Sanders, Boris Johnson, centre right, Chelsea Manning, citizen journalism, cross-subsidies, crowdsourcing, David Attenborough, David Brooks, death of newspapers, Donald Trump, Doomsday Book, Double Irish / Dutch Sandwich, Downton Abbey, Edward Snowden, Etonian, Filter Bubble, forensic accounting, Frank Gehry, future of journalism, G4S, high net worth, invention of movable type, invention of the printing press, Jeff Bezos, jimmy wales, Julian Assange, Mark Zuckerberg, Menlo Park, natural language processing, New Journalism, offshore financial centre, oil shale / tar sands, open borders, packet switching, Panopticon Jeremy Bentham, pre–internet, ransomware, recommendation engine, Ruby on Rails, sexual politics, Silicon Valley, Skype, Snapchat, social web, Socratic dialogue, sovereign wealth fund, speech recognition, Steve Jobs, The Wisdom of Crowds, Tim Cook: Apple, traveling salesman, upwardly mobile, WikiLeaks

The Murdoch Mission: The Digital Transformation of a Media Empire. New York: John Wiley & Sons, 2002. Sandel, M. What Money Can’t Buy. New York: Farrar, Straus and Giroux, 2012. Shenker, J. The Egyptians: A Radical Story. London: Penguin, 2016. Shirky, C. Here Comes Everybody. London: Penguin Books, 2008. Starr, P. The Creation of the Media: Political Origins of Modern Communications. New York: Basic Books, 2004. Surowiecki, J. 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. Tapscott, D. and Williams, A.D. Wikinomics: How Mass Collaboration Changes Everything. Old Saybrook, CT: Tantor Media, 2006. Walmsley, R. Peterloo: The Case Reopened. Manchester: Manchester University Press, 1969. Ward, S.J.A. The Invention of Journalism Ethics: The Path to Objectivity and Beyond.

The Creation of the Media; see Bibliography 2. ‘Goodbye to the Age of Newspapers (Hello to a New Era of Corruption)’, New Republic, 4 March 2009; Paul Starr 3. Quoted in ‘Newspapers Last Bastion Against Political Corruption’; Oliver Burkeman, Guardian, 27 March 2009 4. A reasoned case for the power of ‘open information’ had been advanced in 2004 by the author James Surowiecki in his book The Wisdom of Crowds; see Bibliography. 5. An inquest found he had been unlawfully killed. The policeman who struck him was found not guilty after the jury deliberated for four days. He was dismissed from the police for ‘gross misconduct’ towards Tomlinson, and for using ‘excessive and unlawful force’. 6. Three G4S security guards were cleared of his manslaughter in 2014. Deportation escorts were subsequently trained in safer restraint methods. 7.


Digital Transformation at Scale: Why the Strategy Is Delivery by Andrew Greenway,Ben Terrett,Mike Bracken,Tom Loosemore

Airbnb, bitcoin, blockchain, butterfly effect, call centre, chief data officer, choice architecture, cognitive dissonance, cryptocurrency, Diane Coyle, en.wikipedia.org, G4S, Internet of things, Kevin Kelly, Kickstarter, loose coupling, M-Pesa, minimum viable product, nudge unit, performance metric, ransomware, Silicon Valley, social web, the market place, The Wisdom of Crowds

In the UK, the service standard would have not have succeeded without the design manual that accompanied it. The manual included design patterns, written guidance, job descriptions, links to communities of practice, and much more besides. It built goodwill, clarified meaning and created some collective ownership for what good looked like from right across the organisation. It should not be for a few people in a central team to keep defining the new rules on their own – the wisdom of crowds will ultimately provide a far richer view. The role of the central digital institution as a setter of standards should evolve over time to becoming a chairperson: making sure discussions on what good looks like don’t rumble on indefinitely without coming to a decision, and curating things that capture the current version of best practice. Keeping those discussions going requires effort – but it’s one paid for by maintaining an up-to-date view of best practice, avoiding service failures and attracting good people to come and work with you.


pages: 292 words: 62,575

97 Things Every Programmer Should Know by Kevlin Henney

A Pattern Language, active measures, business intelligence, commoditize, continuous integration, crowdsourcing, database schema, deliberate practice, domain-specific language, don't repeat yourself, Donald Knuth, fixed income, 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.


100 Baggers: Stocks That Return 100-To-1 and How to Find Them by Christopher W Mayer

bank run, Bernie Madoff, business cycle, buy and hold, cloud computing, disintermediation, Dissolution of the Soviet Union, dumpster diving, Edward Thorp, hindsight bias, housing crisis, index fund, Jeff Bezos, market bubble, Network effects, new economy, oil shock, passive investing, peak oil, shareholder value, Silicon Valley, Stanford marshmallow experiment, Steve Jobs, survivorship bias, The Great Moderation, The Wisdom of Crowds

He asked the timeless question “How to do you preserve wealth in times when the Four Horsemen are on the loose?” It was one of the two questions that, in his own words, “long obsessed” him. The other was whether the stock market was wise in its judgments or merely a “foolish consensus of crowds.” One of his books, Wealth, War and Wisdom, dealt explicitly with these questions through the lens of World War II history, a hobby interest of his. On the wisdom of crowds, Biggs found that the stock markets of the world showed “surprisingly good intuitions at the epic turning points. As the old saying goes, when coming events cast their shadows, they often fall on the NYSE.” He wrote how • “the British stock market bottomed . . . in 1940 just before the Battle of Britain”; • “the US market turned forever in late May 1942 around the epic Battle of Midway”; and • the German market “peaked at the high-water mark of the German attack on Russia just before the advance German patrols actually saw the spires of Moscow in early December 1941.”


pages: 606 words: 157,120

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

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, creative destruction, 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, lifelogging, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, moral panic, Narrative Science, Nelson Mandela, Nicholas Carr, packet switching, PageRank, Parag Khanna, Paul Graham, peer-to-peer, 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.


pages: 855 words: 178,507

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

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, Donald Knuth, 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, Jaron Lanier, jimmy wales, Johannes Kepler, John von Neumann, Joseph-Marie Jacquard, lifelogging, Louis Daguerre, Marshall McLuhan, Menlo Park, microbiome, Milgram experiment, Network effects, New Journalism, Norbert Wiener, Norman Macrae, On the Economy of Machinery and Manufactures, PageRank, pattern recognition, phenotype, Pierre-Simon Laplace, pre–internet, Ralph Waldo Emerson, RAND corporation, reversible computing, Richard Feynman, Rubik’s Cube, 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: 221 words: 64,080

Different: Escaping the Competitive Herd by Youngme Moon

AltaVista, Atul Gawande, business cycle, commoditize, creative destruction, hedonic treadmill, Richard Feynman, Saturday Night Live, selection bias, 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: 253 words: 65,834

Mastering the VC Game: A Venture Capital Insider Reveals How to Get From Start-Up to IPO on Your Terms by Jeffrey Bussgang

business cycle, business process, carried interest, digital map, discounted cash flows, hiring and firing, Jeff Bezos, Kickstarter, Marc Andreessen, Mark Zuckerberg, Menlo Park, moveable type in China, pattern recognition, Paul Graham, performance metric, Peter Thiel, pets.com, risk tolerance, rolodex, Ronald Reagan, Sand Hill Road, selection bias, shareholder value, Silicon Valley, Skype, software as a service, sovereign wealth fund, Steve Jobs, technology bubble, The Wisdom of Crowds

The typical start-up that is a good fit for VC money may not generate any revenue for two to four years, if ever. And the typical entrepreneur who is a good fit for VC money wants and needs the very active participation of the capital provider in the oversight of the business. THE PLAYERS A VC firm tends to be organized (often unwittingly) around the thesis of James Surowiecki’s book The Wisdom of Crowds—that is, no one person can be as smart as a group of informed, independent-minded people. And the way to make the best investment decisions is to construct a democratic process rather than a hierarchical one. Thus, VC firms typically gather a group of experienced investment professionals with diverse backgrounds and perspectives and do not allow any one individual’s power or status to sway the discussion.


pages: 654 words: 191,864

Thinking, Fast and Slow by Daniel Kahneman

Albert Einstein, Atul Gawande, availability heuristic, Bayesian statistics, 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, hedonic treadmill, hindsight bias, index card, information asymmetry, job satisfaction, John von Neumann, Kenneth Arrow, libertarian paternalism, loss aversion, medical residency, mental accounting, meta analysis, meta-analysis, nudge unit, pattern recognition, Paul Samuelson, pre–internet, price anchoring, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, Robert Metcalfe, Ronald Reagan, Shai Danziger, Supply of New York City Cabdrivers, The Chicago School, The Wisdom of Crowds, Thomas Bayes, 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.


Designing Search: UX Strategies for Ecommerce Success by Greg Nudelman, Pabini Gabriel-Petit

access to a mobile phone, Albert Einstein, AltaVista, augmented reality, barriers to entry, business intelligence, call centre, crowdsourcing, information retrieval, Internet of things, performance metric, QR code, recommendation engine, RFID, search engine result page, semantic web, Silicon Valley, social graph, social web, speech recognition, text mining, the map is not the territory, The Wisdom of Crowds, web application, zero-sum game, Zipcar

that presents a fairly current list of the social search services available today. Figure 14-11: A Social Search Service Diagram (Image credit: Wired, November 2010): http://www.wired.com/magazine/2010/11/st_flowchart_social/. Yet, there’s another class of social search services that makes use of aggregated social data from large networks. I call this “collective social search” since it’s like the wisdom of crowds effect, in that you can see trends from the collective that might be useful in guiding your search. Google Search Suggest is an example of this—it shows you the common search phrases for a given few words. Twitter’s Trending Topics and OneRiot are similar. I think the popularity of this approach is that it’s algorithmic, meaning you can throw more programmers at it and hopefully improve the results.


pages: 259 words: 73,193

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

4chan, Albert Einstein, AltaVista, Andrew Keen, augmented reality, Burning Man, Carrington event, 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, lifelogging, Loebner Prize, low earth orbit, Marshall McLuhan, McMansion, moral panic, 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: 251 words: 76,868

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

Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamonds, Bob Geldof, borderless world, BRICs, British Empire, call centre, carbon footprint, charter city, clean water, cleantech, cloud computing, commoditize, continuation of politics by other means, 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, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Kickstarter, laissez-faire capitalism, Live Aid, Masdar, mass immigration, megacity, microcredit, mutually assured destruction, Naomi Klein, Nelson Mandela, New Urbanism, off grid, offshore financial centre, oil shock, open economy, out of africa, Parag Khanna, 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: 318 words: 77,223

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

activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, disruptive innovation, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, 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, zero-sum game

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: 261 words: 79,883

Start With Why: How Great Leaders Inspire Everyone to Take Action by Simon Sinek

Apple II, Apple's 1984 Super Bowl advert, Black Swan, business cycle, commoditize, hiring and firing, John Markoff, low cost airline, Nick Leeson, RAND corporation, risk tolerance, Ronald Reagan, shareholder value, Steve Ballmer, Steve Jobs, Steve Wozniak, The Wisdom of Crowds, trade route

There are a few books and authors that have, over the years, inspired me, spurred ideas and offered me new perspectives: the works of Ken Blanchard, of Tom Friedman and of Seth Godin, The Starfish and the Spider by Ori Brafman and Rod Beckstrom, First, Break All the Rules by Marcus Buckingham, Good to Great by Jim Collins, The 7 Habits of Highly Effective People by Stephen Covey, The 4-Hour Workweek by Tim Ferriss, Never Eat Alone by Keith Ferrazzi, E-Myth by Michael Gerber, The Tipping Point and Outliers by Malcolm Gladwell, Chaos by James Gleick, Emotional Intelligence by Daniel Goleman, Made to Stick by Chip and Dan Heath, Who Moved My Cheese? by Spencer Johnson, M.D., The Monk and the Riddle by Randy Komisar, The Five Dysfunctions of a Team by Patrick Lencioni, Freakanomics by Steven D. Levitt and Stephen J. Dubner, FISH! By Stephen Lundin, Harry Paul, John Christensen and Ken Blanchard, The Naked Brain by Richard Restack, Authentic Happiness by Martin Seligman, The Wisdom of Crowds by James Surowiecki, The Black Swan by Nicholas Taleb, American Mania by Peter Whybrow, M.D., and the single most important book everyone should read, the book that teaches us that we cannot control the circumstances around us, all we can control is our attitude—Man’s Search for Meaning by Viktor Frankel. I want to especially thank all those people who have joined this cause and actively work to inspire those around you.


pages: 296 words: 78,631

Hello World: Being Human in the Age of Algorithms by Hannah Fry

23andMe, 3D printing, Air France Flight 447, Airbnb, airport security, augmented reality, autonomous vehicles, Brixton riot, chief data officer, computer vision, crowdsourcing, DARPA: Urban Challenge, Douglas Hofstadter, Elon Musk, Firefox, Google Chrome, Gödel, Escher, Bach, Ignaz Semmelweis: hand washing, John Markoff, Mark Zuckerberg, meta analysis, meta-analysis, pattern recognition, Peter Thiel, RAND corporation, ransomware, recommendation engine, ride hailing / ride sharing, selection bias, self-driving car, Shai Danziger, Silicon Valley, Silicon Valley startup, Snapchat, speech recognition, Stanislav Petrov, statistical model, Stephen Hawking, Steven Levy, Tesla Model S, The Wisdom of Crowds, Thomas Bayes, Watson beat the top human players on Jeopardy!, web of trust, William Langewiesche

Philip Howard, Brian Francis, Keith Soothill and Les Humphreys, OGRS 3: The Revised Offender Group Reconviction Scale, Research Summary 7/09 (London: Ministry of Justice, 2009), https://core.ac.uk/download/pdf/1556521.pdf. 21. A slight caveat here: there probably is some selection bias in this statistic. ‘Ask the audience’ was typically used in the early rounds of the game, when the questions were a lot easier. None the less, the idea of the collective opinions of a group being more accurate than those of any individual is a well-documented phenomenon. For more on this, see James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter than the Few (New York: Doubleday, 2004), p. 4. 22. Netflix Technology Blog, https://medium.com/netflix-techblog/netflix-recommendations-beyond-the-5-stars-part-2-d9b96aa399f5. 23. Shih-ho Cheng, ‘Unboxing the random forest classifier: the threshold distributions’, Airbnb Engineering and Data Science, https://medium.com/airbnb-engineering/unboxing-the-random-forest-classifier-the-threshold-distributions-22ea2bb58ea6. 24.


pages: 245 words: 72,893

How Democracy Ends by David Runciman

barriers to entry, basic income, Bernie Sanders, bitcoin, blockchain, Capital in the Twenty-First Century by Thomas Piketty, centre right, crowdsourcing, cuban missile crisis, Dominic Cummings, Donald Trump, Edward Snowden, first-past-the-post, Francis Fukuyama: the end of history, full employment, Internet of things, Joseph Schumpeter, Kickstarter, loss aversion, Mahatma Gandhi, Mark Zuckerberg, money: store of value / unit of account / medium of exchange, mutually assured destruction, Network effects, Norman Mailer, Panopticon Jeremy Bentham, Peter Thiel, quantitative easing, self-driving car, Silicon Valley, Steven Pinker, The Wisdom of Crowds, Travis Kalanick, universal basic income, Yogi Berra

Direct democracy, of the kind practised in the ancient world, was also designed to correct for our biases. Might this be a solution to the problem of our shared distraction? Philosophers from Aristotle onwards have argued that the best way to avoid individual errors of judgement is to pool our opinions so that the weight of numbers can tell. Collective decision-making works better than any individual’s choices if our biases are allowed to cancel each other out. This is the wisdom of crowds. The internet age has seen an enormous revival of interest in this idea. Digital technology now enables the pooling of opinions on a vast scale. Collectively we can rate products, predict futures, solve puzzles and even edit an encyclopedia better than any one of us could do on our own. The internet has also dramatically lowered the barriers to entry. To join a group decision there is no longer any need to gather in the market square.


pages: 252 words: 73,131

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

"Robert Solow", Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, business cycle, buy and hold, centralized clearinghouse, Chuck Templeton: OpenTable:, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, 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, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, 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, uber lyft, uranium enrichment, Vickrey auction, Vilfredo Pareto, 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: 720 words: 197,129

The Innovators: How a Group of Inventors, Hackers, Geniuses and Geeks Created the Digital Revolution by Walter Isaacson

1960s counterculture, Ada Lovelace, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, AltaVista, Apple II, augmented reality, back-to-the-land, beat the dealer, Bill Gates: Altair 8800, bitcoin, Bob Noyce, Buckminster Fuller, Byte Shop, c2.com, call centre, citizen journalism, Claude Shannon: information theory, Clayton Christensen, commoditize, computer age, crowdsourcing, cryptocurrency, Debian, desegregation, Donald Davies, Douglas Engelbart, Douglas Engelbart, Douglas Hofstadter, Dynabook, El Camino Real, Electric Kool-Aid Acid Test, en.wikipedia.org, Firefox, Google Glasses, Grace Hopper, Gödel, Escher, Bach, Hacker Ethic, Haight Ashbury, Howard Rheingold, Hush-A-Phone, HyperCard, hypertext link, index card, Internet Archive, Jacquard loom, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John von Neumann, Joseph-Marie Jacquard, Leonard Kleinrock, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Mitch Kapor, Mother of all demos, new economy, New Journalism, Norbert Wiener, Norman Macrae, packet switching, PageRank, Paul Terrell, pirate software, popular electronics, pre–internet, RAND corporation, Ray Kurzweil, RFC: Request For Comment, Richard Feynman, Richard Stallman, Robert Metcalfe, Rubik’s Cube, Sand Hill Road, Saturday Night Live, self-driving car, Silicon Valley, Silicon Valley startup, Skype, slashdot, speech recognition, Steve Ballmer, Steve Crocker, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, technological singularity, technoutopianism, Ted Nelson, The Coming Technological Singularity, The Nature of the Firm, The Wisdom of Crowds, Turing complete, Turing machine, Turing test, Vannevar Bush, Vernor Vinge, Von Neumann architecture, Watson beat the top human players on Jeopardy!, Whole Earth Catalog, Whole Earth Review, wikimedia commons, William Shockley: the traitorous eight

On the discussion page, I provided sources for where Einstein actually was during the time in question (Princeton) and what passport he was using (Swiss). But tenacious Albanian partisans kept reinserting the claim. The Einstein-in-Albania tug-of-war lasted weeks. I became worried that the obstinacy of a few passionate advocates could undermine Wikipedia’s reliance on the wisdom of crowds. But after a while, the edit wars ended, and the article no longer had Einstein going to Albania. At first I didn’t credit that success to the wisdom of crowds, since the push for a fix had come from me and not from the crowd. Then I realized that I, like thousands of others, was in fact a part of the crowd, occasionally adding a tiny bit to its wisdom. A key principle of Wikipedia was that articles should have a neutral point of view. This succeeded in producing articles that were generally straightforward, even on controversial topics such as global warming and abortion.


pages: 398 words: 86,023

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

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, Kickstarter, Marshall McLuhan, Mitch Kapor, 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: 298 words: 81,200

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

Ada Lovelace, Albert Einstein, Alfred Russel Wallace, carbon-based life, Cass Sunstein, cleantech, complexity theory, conceptual framework, cosmic microwave background, creative destruction, crowdsourcing, data acquisition, digital Maoism, digital map, discovery of DNA, Dmitri Mendeleev, double entry bookkeeping, double helix, Douglas Engelbart, 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, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Johannes Kepler, John Snow's cholera map, Joseph Schumpeter, Joseph-Marie Jacquard, Kevin Kelly, lone genius, Louis Daguerre, Louis Pasteur, Mason jar, mass immigration, 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: 266 words: 86,324

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

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, Pepto Bismol, probability theory / Blaise Pascal / Pierre de Fermat, RAND corporation, random walk, Richard Feynman, Ronald Reagan, Stephen Hawking, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, 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: 270 words: 79,992

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

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, commoditize, creative destruction, crony capitalism, cross-subsidies, crowdsourcing, David Brooks, death of newspapers, disruptive innovation, Donald Trump, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, Exxon Valdez, Fall of the Berlin Wall, Filter Bubble, Firefox, global supply chain, Google Chrome, Gordon Gekko, Hacker Ethic, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, Julian Assange, Kevin Kelly, Khan Academy, Kickstarter, Lean Startup, Mark Zuckerberg, minimum viable product, Mitch Kapor, Mohammed Bouazizi, Mother of all demos, Narrative Science, new economy, Occupy movement, old-boy network, peer-to-peer, period drama, Peter Thiel, pirate software, publication bias, Robert Metcalfe, 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: 290 words: 82,871

The Hidden Half: How the World Conceals Its Secrets by Michael Blastland

air freight, Alfred Russel Wallace, banking crisis, Bayesian statistics, Berlin Wall, central bank independence, cognitive bias, complexity theory, Deng Xiaoping, Diane Coyle, Donald Trump, epigenetics, experimental subject, full employment, George Santayana, hindsight bias, income inequality, manufacturing employment, mass incarceration, meta analysis, meta-analysis, minimum wage unemployment, nudge unit, oil shock, p-value, personalized medicine, phenotype, Ralph Waldo Emerson, random walk, randomized controlled trial, replication crisis, Richard Thaler, selection bias, the map is not the territory, the scientific method, The Wisdom of Crowds, twin studies

Even within the specialist niches, there’s often little agreement: ‘The problem with social science is not so much that it has one theory for one thing and another theory for another thing,’ he wrote, ‘but rather that it has many theories for the very same thing. Even worse, these theories – although often interesting and plausible when considered individually – are fundamentally incoherent when viewed collectively.’ Like the aphorisms we came across earlier that point both ways – ‘look before you leap, but he who hesitates is lost’ – theory often does the same. At a popular level, there’s the wisdom of crowds, and the madness of crowds (or groupthink); the value of impulsive judgement (Blink), and the dangers of impulsive judgement (Kahneman’s ‘system 1’ thinking). In its defence, social science is more than a manual. Duncan Watts says it helps us ‘to challenge common-sense assumptions about the nature of social reality, provide rich descriptions of lived experience, inspire new ways of thinking about human behaviour and shed light on specific empirical puzzles – that do not directly address practical problems but can still provide valuable insight’.


pages: 261 words: 86,905

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

asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, commoditize, creative destruction, 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, Myron Scholes, negative equity, 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, Right to Buy, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Jobs, survivorship bias, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, wealth creators, 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: 249 words: 81,217

The Art of Rest: How to Find Respite in the Modern Age by Claudia Hammond

Anton Chekhov, conceptual framework, correlation does not imply causation, Desert Island Discs, Donald Trump, El Camino Real, iterative process, Kickstarter, lifelogging, longitudinal study, Menlo Park, meta analysis, meta-analysis, Milgram experiment, moral panic, Stephen Hawking, The Spirit Level, The Wisdom of Crowds, theory of mind, Thorstein Veblen

And the more you know about how important restful activities are, I find, the easier it is to do them deliberately and without guilt. Like the music charts, the Rest Test top ten is counted down in reverse order, starting with the tenth most popular restful activity, and ending with number one. I’m happy to tell you from the outset that the most popular activity turned out to be reading. You know what they say about the wisdom of crowds: 18,000 people can’t be wrong. Enjoy the book, things don’t get any more restful than reading, it seems, and what could be more restful than reading a book about rest? 10 MINDFULNESS Question: What is a mindfulness teacher’s favourite food? Answer: Raisins This is not a joke, as you’ve probably noticed. If you go to mindfulness classes then it’s likely that at some point a box of raisins will be produced and you will be given a single raisin.


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

algorithmic trading, automated trading system, backtesting, buy and hold, 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, zero-sum game

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: 422 words: 89,770

Death of the Liberal Class by Chris Hedges

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, Pearl River Delta, 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: 788 words: 223,004

Merchants of Truth: The Business of News and the Fight for Facts by Jill Abramson

23andMe, 4chan, Affordable Care Act / Obamacare, Alexander Shulgin, Apple's 1984 Super Bowl advert, barriers to entry, Bernie Madoff, Bernie Sanders, Charles Lindbergh, Chelsea Manning, citizen journalism, cloud computing, commoditize, corporate governance, creative destruction, crowdsourcing, death of newspapers, digital twin, diversified portfolio, Donald Trump, East Village, Edward Snowden, Ferguson, Missouri, Filter Bubble, future of journalism, glass ceiling, Google Glasses, haute couture, hive mind, income inequality, information asymmetry, invisible hand, Jeff Bezos, Joseph Schumpeter, Khyber Pass, late capitalism, Marc Andreessen, Mark Zuckerberg, move fast and break things, move fast and break things, Nate Silver, new economy, obamacare, Occupy movement, performance metric, Peter Thiel, phenotype, pre–internet, race to the bottom, recommendation engine, Robert Mercer, Ronald Reagan, Saturday Night Live, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, skunkworks, Snapchat, social intelligence, social web, Steve Jobs, Steven Levy, technoutopianism, telemarketer, the scientific method, The Wisdom of Crowds, Tim Cook: Apple, too big to fail, WikiLeaks

They were sometimes hasty in putting news “out there” and letting readers decide whether something was true. Their headlines were hyped, although recently their desire to be serious news providers had improved quality. BuzzFeed and Vice depended on social media sharing, a broad metric called “engagement,” which included time spent reading, the number of likes, shares, and comments on social media, and a host of other factors. The wisdom of crowds, with commenters rather than professional journalists setting the terms, drove coverage. The breathless news cycle left little time for formal training of the young, aspiring journalists who mostly sat behind computers scraping previously published content off the internet and rewriting it or spinning it in new directions. By understanding the power of social media and video, BuzzFeed and Vice had won millions of devoted readers and viewers, largely using the giant tech platforms of Facebook and Google to amass followings among the young, the demographic most prized by advertisers.

Video was one of the few areas where Facebook had not been on the leading edge, and Zuckerberg was angry over lagging behind YouTube. In 2014 the ad industry’s bible, Ad Age, detailed Facebook’s strategy for taking on its main rival. Zuckerberg’s first move was mimicry. A popular feature on both BuzzFeed and YouTube was showing how many views a particular video had enjoyed. Viewers liked to watch stories that had high traffic, assuming popular tastes revealed the wisdom of crowds. So Facebook announced that it too would include data on numbers of views for each video. It also gave preference to videos displayed on its own digital player and made it cumbersome to watch YouTube videos on Facebook. YouTube had already established profitable partnerships with content-makers like Vice, giving them a cut of ad revenue. But Facebook resisted doing so until it created partnerships with the New York Times and BuzzFeed, which were among the news providers Facebook paid, to the tune of $3 million annually, to provide live video streaming of news, stunts, and other events that drew large audiences to the Facebook app, which had a designated area for video.


pages: 351 words: 100,791

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

airport security, Cass Sunstein, choice architecture, collateralized debt obligation, creative destruction, 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, Norman Mailer, online collectivism, plutocrats, Plutocrats, Richard Thaler, Rodney Brooks, self-driving car, Silicon Valley, Silicon Valley ideology, Stanford marshmallow experiment, 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: 324 words: 96,491

Messing With the Enemy: Surviving in a Social Media World of Hackers, Terrorists, Russians, and Fake News by Clint Watts

4chan, active measures, Affordable Care Act / Obamacare, barriers to entry, Berlin Wall, Bernie Sanders, Chelsea Manning, Climatic Research Unit, crowdsourcing, Daniel Kahneman / Amos Tversky, Donald Trump, drone strike, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, failed state, Fall of the Berlin Wall, Filter Bubble, global pandemic, Google Earth, illegal immigration, Internet of things, Julian Assange, loss aversion, Mark Zuckerberg, Mikhail Gorbachev, mobile money, mutually assured destruction, obamacare, Occupy movement, offshore financial centre, pre–internet, side project, Silicon Valley, Snapchat, The Wisdom of Crowds, Turing test, University of East Anglia, Valery Gerasimov, WikiLeaks, zero day

During breaks, academic presenters often conducted a hasty Google search and revealed to these analog counterterrorists that their precious secret intelligence sat on the World Wide Web for everyone to see. The advantages the U.S. intelligence community had once enjoyed were slipping away in the open-source world. A few years before, in 2004, American journalist James Surowiecki had published a book called The Wisdom of Crowds, which described how the internet provided a vehicle for crowds to make smarter decisions than even the smartest person in the crowd, working alone, could make. Collective intelligence mined from the internet through crowdsourcing proved effective in three types of decisions: coordination challenges, where groups work together to determine an optimal solution, such as the best way to get to work or travel overseas; cognition calculations, where people involved in a market compete to provide the right answer, such as guessing the winner of an election; and cooperation networks, where a central system collects information and the crowd then controls behavior and enforces compliance—think Wikipedia as an example.


pages: 268 words: 109,447

The Cultural Logic of Computation by David Golumbia

Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, American ideology, Benoit Mandelbrot, borderless world, business process, cellular automata, citizen journalism, Claude Shannon: information theory, computer age, corporate governance, creative destruction, en.wikipedia.org, finite state, future of work, Google Earth, Howard Zinn, IBM and the Holocaust, iterative process, Jaron Lanier, jimmy wales, John von Neumann, Joseph Schumpeter, late capitalism, means of production, natural language processing, Norbert Wiener, packet switching, RAND corporation, Ray Kurzweil, RFID, Richard Stallman, semantic web, Shoshana Zuboff, Slavoj Žižek, social web, stem cell, Stephen Hawking, Steve Ballmer, Stewart Brand, strong AI, supply-chain management, supply-chain management software, Ted Nelson, telemarketer, The Wisdom of Crowds, theory of mind, Turing machine, Turing test, Vannevar Bush, web application

Plans and Situated Actions: The Problem of Human-Machine Communication. New York: Cambridge University Press. Sullivan, Laurie. 2004. “Wal-Mart’s Way: Heavyweight Retailer Looks Inward to Stay Innovative in Business Technology.” Information Week (September 27). http://www.informationweek.com. Sunstein, Cass R. 2001. Republic.com. Princeton, NJ: Princeton University Press. Surowiecki, James. 2005. The Wisdom of Crowds. New York: Anchor Books. Swartz, Mimi, with Sherron Watkins. 2003. Power Failure: The Inside Story of the Collapse of Enron. New York: Doubleday. Sweezy, Paul M. 1972. Modern Capitalism and Other Essays. New York: Monthly Review Press. Tanselle, G. Thomas. 1992. A Rationale of Textual Criticism. Philadelphia, PA: University of Pennsylvania Press. Taylor, R. Gregory. 1998. Models of Computation and Formal Languages.


pages: 323 words: 95,939

Present Shock: When Everything Happens Now by Douglas Rushkoff

algorithmic trading, Andrew Keen, bank run, Benoit Mandelbrot, big-box store, Black Swan, British Empire, Buckminster Fuller, business cycle, 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 pandemic, 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, lateral thinking, Law of Accelerating Returns, loss aversion, mandelbrot fractal, Marshall McLuhan, Merlin Mann, Milgram experiment, mutually assured destruction, negative equity, 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, selective serotonin reuptake inhibitor (SSRI), 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, zero-sum game

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: 410 words: 101,260

Originals: How Non-Conformists Move the World by Adam Grant

Albert Einstein, Apple's 1984 Super Bowl advert, availability heuristic, barriers to entry, business process, business process outsourcing, Cass Sunstein, clean water, cognitive dissonance, creative destruction, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dean Kamen, double helix, Elon Musk, fear of failure, Firefox, George Santayana, Ignaz Semmelweis: hand washing, Jeff Bezos, job satisfaction, job-hopping, Joseph Schumpeter, Kickstarter, Lean Startup, Louis Pasteur, Mahatma Gandhi, Mark Zuckerberg, meta analysis, meta-analysis, minimum viable product, Nelson Mandela, Network effects, pattern recognition, Paul Graham, Peter Thiel, Ralph Waldo Emerson, random walk, risk tolerance, Rosa Parks, Saturday Night Live, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Steven Pinker, The Wisdom of Crowds, women in the workforce

When artists assessed one another’s performances, they were about twice as accurate as managers and test audiences in predicting how often the videos would be shared. Compared to creators, managers and test audiences were 56 percent and 55 percent more prone to major false negatives, undervaluing a strong, novel performance by five ranks or more in the set of ten they viewed. We often speak of the wisdom of crowds, but we need to be careful about which crowds we’re considering. On average, the combined forecasts of all 120 circus managers were no better than a typical single creator’s predictions. Managers and test audiences tended to fixate on a particular category of favored acts and reject the rest. Creators were more open to different kinds of performances—they saw potential in peers who did aerial and ground acrobatics, but also in skilled jugglers and mimes.* Instead of attempting to assess our own originality or seeking feedback from managers, we ought to turn more often to our colleagues.


pages: 1,034 words: 241,773

Enlightenment Now: The Case for Reason, Science, Humanism, and Progress by Steven Pinker

3D printing, access to a mobile phone, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Alfred Russel Wallace, anti-communist, Anton Chekhov, Arthur Eddington, artificial general intelligence, availability heuristic, Ayatollah Khomeini, basic income, Berlin Wall, Bernie Sanders, Black Swan, Bonfire of the Vanities, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, clockwork universe, cognitive bias, cognitive dissonance, Columbine, conceptual framework, correlation does not imply causation, creative destruction, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, dark matter, decarbonisation, deindustrialization, dematerialisation, demographic transition, Deng Xiaoping, distributed generation, diversified portfolio, Donald Trump, Doomsday Clock, double helix, effective altruism, Elon Musk, en.wikipedia.org, end world poverty, endogenous growth, energy transition, European colonialism, experimental subject, Exxon Valdez, facts on the ground, Fall of the Berlin Wall, first-past-the-post, Flynn Effect, food miles, Francis Fukuyama: the end of history, frictionless, frictionless market, germ theory of disease, Gini coefficient, Hans Rosling, hedonic treadmill, helicopter parent, Hobbesian trap, humanitarian revolution, Ignaz Semmelweis: hand washing, income inequality, income per capita, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), invention of writing, Jaron Lanier, Joan Didion, job automation, Johannes Kepler, John Snow's cholera map, Kevin Kelly, Khan Academy, knowledge economy, l'esprit de l'escalier, Laplace demon, life extension, long peace, longitudinal study, Louis Pasteur, Martin Wolf, mass incarceration, meta analysis, meta-analysis, Mikhail Gorbachev, minimum wage unemployment, moral hazard, mutually assured destruction, Naomi Klein, Nate Silver, Nathan Meyer Rothschild: antibiotics, Nelson Mandela, New Journalism, Norman Mailer, nuclear winter, obamacare, open economy, Paul Graham, peak oil, Peter Singer: altruism, Peter Thiel, precision agriculture, prediction markets, purchasing power parity, Ralph Nader, randomized controlled trial, Ray Kurzweil, rent control, Republic of Letters, Richard Feynman, road to serfdom, Robert Gordon, Rodney Brooks, rolodex, Ronald Reagan, Rory Sutherland, Saturday Night Live, science of happiness, Scientific racism, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Simon Kuznets, Skype, smart grid, sovereign wealth fund, stem cell, Stephen Hawking, Steven Pinker, Stewart Brand, Stuxnet, supervolcano, technological singularity, Ted Kaczynski, The Rise and Fall of American Growth, the scientific method, The Signal and the Noise by Nate Silver, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, total factor productivity, union organizing, universal basic income, University of East Anglia, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, urban renewal, War on Poverty, We wanted flying cars, instead we got 140 characters, women in the workforce, working poor, World Values Survey, Y2K

Communities can thereby come up with rules that allow true beliefs to emerge from the rough-and-tumble of argument, such as that you have to provide reasons for your beliefs, you’re allowed to point out flaws in the beliefs of others, and you’re not allowed to forcibly shut people up who disagree with you. Add in the rule that you should allow the world to show you whether your beliefs are true or false, and we can call the rules science. With the right rules, a community of less than fully rational thinkers can cultivate rational thoughts.31 The wisdom of crowds can also elevate our moral sentiments. When a wide enough circle of people confer on how best to treat each other, the conversation is bound to go in certain directions. If my starting offer is “I get to rob, beat, enslave, and kill you and your kind, but you don’t get to rob, beat, enslave, or kill me or my kind,” I can’t expect you to agree to the deal or third parties to ratify it, because there’s no good reason that I should get privileges just because I’m me and you’re not.32 Nor are we likely to agree to the deal “I get to rob, beat, enslave, and kill you and your kind, and you get to rob, beat, enslave, and kill me and my kind,” despite its symmetry, because the advantages either of us might get in harming the other are massively outweighed by the disadvantages we would suffer in being harmed (yet another implication of the Law of Entropy: harms are easier to inflict and have larger effects than benefits).

There were 69 days left in the forecast period, so he divided 69 by 365 and multiplied the fraction by 1.8. That meant that the chance of an Islamist attack in Western Europe by the end of March was about one in three. A manner of forecasting very different from the way most people think led to a very different forecast. Two other traits distinguish superforecasters from pundits and chimpanzees. The superforecasters believe in the wisdom of crowds, laying their hypotheses on the table for others to criticize or amend and pooling their estimates with those of others. And they have strong opinions on chance and contingency in human history as opposed to necessity and fate. Tetlock and Mellers asked different groups of people whether they agreed with statements like the following: Events unfold according to God’s plan. Everything happens for a reason.


pages: 459 words: 103,153

Adapt: Why Success Always Starts With Failure by Tim Harford

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, creative destruction, credit crunch, Credit Default Swap, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, Deep Water Horizon, Deng Xiaoping, disruptive innovation, 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, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, Jarndyce and Jarndyce, John Harrison: Longitude, knowledge worker, loose coupling, Martin Wolf, mass immigration, 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, zero-sum game

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: 764 words: 261,694

The Elements of Statistical Learning (Springer Series in Statistics) by Trevor Hastie, Robert Tibshirani, Jerome Friedman

Bayesian statistics, bioinformatics, computer age, conceptual framework, correlation coefficient, G4S, greed is good, linear programming, p-value, pattern recognition, random walk, selection bias, speech recognition, statistical model, stochastic process, The Wisdom of Crowds

Let the Bayes optimal decision at x be G(x) = 1 in a two-class example. Suppose each of the weak learners G∗b have an error-rate eb = e < 0.5, and let S1 (x) = PB ∗ b=1 I(Gb (x) = 1) be the consensus vote for class 1. Since the weak learners are assumed to be independent, S1 (x) ∼ Bin(B, 1 − e), and Pr(S1 > B/2) → 1 as B gets large. This concept has been popularized outside of statistics as the “Wisdom of Crowds” (Surowiecki, 2004) — the collective knowledge of a diverse and independent body of people typically exceeds the knowledge of any single individual, and can be harnessed by voting. Of course, the main caveat here is “independent,” and bagged trees are not. Figure 8.11 illustrates the power of a consensus vote in a simulated example, where only 30% of the voters have some knowledge. In Chapter 15 we see how random forests improve on bagging by reducing the correlation between the sampled trees.

Statistical significance for genomewide studies, Proceedings of the National Academy of Sciences 100-: 9440– 9445. Storey, J., Taylor, J. and Siegmund, D. (2004). Strong control, conservative point estimation, and simultaneous conservative consistency of false discovery rates: A unified approach., Journal of the Royal Statistical Society, Series B 66: 187–205. 724 References Surowiecki, J. (2004). The Wisdom of Crowds: Why the Many are Smarter than the Few and How Collective Wisdom Shapes Business, Economics, Societies and Nations., Little, Brown. Swayne, D., Cook, D. and Buja, A. (1991). Xgobi: Interactive dynamic graphics in the X window system with a link to S, ASA Proceedings of Section on Statistical Graphics, pp. 1–8. Tanner, M. and Wong, W. (1987). The calculation of posterior distributions by data augmentation (with discussion), Journal of the American Statistical Association 82: 528–550.


pages: 302 words: 82,233

Beautiful security by Andy Oram, John Viega

Albert Einstein, Amazon Web Services, business intelligence, business process, call centre, cloud computing, corporate governance, credit crunch, crowdsourcing, defense in depth, Donald Davies, en.wikipedia.org, fault tolerance, Firefox, loose coupling, Marc Andreessen, market design, MITM: man-in-the-middle, Monroe Doctrine, new economy, Nicholas Carr, Nick Leeson, Norbert Wiener, optical character recognition, packet switching, peer-to-peer, performance metric, pirate software, Robert Bork, 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, 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

accounting loophole / creative accounting, Albert Einstein, asset allocation, asset-backed security, backtesting, beat the dealer, Bernie Madoff, BRICs, butter production in bangladesh, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, 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, money market fund, mortgage tax deduction, new economy, Own Your Own Home, passive investing, Paul Samuelson, 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, stocks for the long run, survivorship bias, The Myth of the Rational Market, the rule of 72, 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

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 asymmetry, information retrieval, intangible asset, inventory management, life extension, linear programming, longitudinal study, 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, Vilfredo Pareto, 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: 309 words: 114,984

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

"Robert Solow", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, AI winter, Airbnb, Atul Gawande, Captain Sullenberger Hudson, Checklist Manifesto, Chuck Templeton: OpenTable:, Clayton Christensen, collapse of Lehman Brothers, computer age, creative destruction, crowdsourcing, deskilling, disruptive innovation, 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, Kickstarter, knowledge worker, lifelogging, medical malpractice, medical residency, Menlo Park, minimum viable product, natural language processing, Network effects, Nicholas Carr, obamacare, pattern recognition, peer-to-peer, 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, Thomas Bayes, Toyota Production System, Uber for X, US Airways Flight 1549, 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: 401 words: 115,959

Philanthrocapitalism by Matthew Bishop, Michael Green, Bill Clinton

Albert Einstein, anti-communist, barriers to entry, battle of ideas, Bernie Madoff, Bob Geldof, Bonfire of the Vanities, business process, business process outsourcing, Charles Lindbergh, clean water, cleantech, corporate governance, corporate social responsibility, Dava Sobel, David Ricardo: comparative advantage, don't be evil, family office, financial innovation, full employment, global pandemic, global village, God and Mammon, Hernando de Soto, high net worth, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Dyson, John Harrison: Longitude, joint-stock company, knowledge economy, knowledge worker, Live Aid, lone genius, Marc Andreessen, market bubble, mass affluent, microcredit, Mikhail Gorbachev, Nelson Mandela, new economy, offshore financial centre, old-boy network, peer-to-peer lending, performance metric, Peter Singer: altruism, plutocrats, Plutocrats, profit maximization, profit motive, Richard Feynman, risk tolerance, risk-adjusted returns, Ronald Coase, Ronald Reagan, shareholder value, Silicon Valley, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade liberalization, transaction costs, trickle-down economics, wealth creators, winner-take-all economy, working poor, World Values Survey, X Prize

Those customers were significantly more likely to shop again at Crate & Barrel than those in a control group who did not receive a voucher (and many of them gave additional money of their own once they came to the site and got excited by a project). “Customers love being trusted,” says Best. Even more exciting is the possibility of joining with sites such as DonorsChoose and Kiva to tap the “wisdom of crowds”—the possibility that large groups in aggregate may have a better grasp of the truth than a few so-called experts looking down on a situation from above. In 2009, the Gates Foundation allocated $4 million to match any gifts made by citizen philanthropists to projects posted on DonorsChoose by high school teachers preparing students to go to college. As Best says, “if the Gates Foundation is outsourcing its grant-making to ordinary people, it is probably the start of a trend.”


pages: 385 words: 118,314

Cities Are Good for You: The Genius of the Metropolis by Leo Hollis

Airbnb, banking crisis, Berlin Wall, Boris Johnson, Broken windows theory, Buckminster Fuller, call centre, car-free, carbon footprint, cellular automata, clean water, cloud computing, complexity theory, congestion charging, creative destruction, credit crunch, Credit Default Swap, crowdsourcing, Deng Xiaoping, digital map, East Village, Edward Glaeser, Enrique Peñalosa, Firefox, Frank Gehry, Geoffrey West, Santa Fe Institute, Gini coefficient, Google Earth, Guggenheim Bilbao, haute couture, Hernando de Soto, housing crisis, illegal immigration, income inequality, informal economy, Internet of things, invisible hand, Jane Jacobs, Kickstarter, knowledge economy, knowledge worker, Long Term Capital Management, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, Masdar, mass immigration, megacity, negative equity, new economy, New Urbanism, Occupy movement, openstreetmap, packet switching, Panopticon Jeremy Bentham, place-making, Ray Oldenburg, Richard Florida, sharing economy, Silicon Valley, Skype, smart cities, smart grid, spice trade, Steve Jobs, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, The Great Good Place, the High Line, The Spirit Level, The Wisdom of Crowds, Thomas Malthus, trade route, traveling salesman, urban planning, urban renewal, urban sprawl, walkable city, white flight, Y2K, Yom Kippur War

Since Jacobs’s epic battle with Moses and Whyte’s studies of everyday life on the city streets there have been a number of attempts to transform planning from an arrogant performance in which the architect knew what was best for the people, adhering to strict dogma as the necessary medicine for society’s irrational nature. Instead, many planners now recognise the value of a street-up approach, of designing for the way that people actually live rather than the way one might hope they behave. One way of opening the potential for street-up communities is by doing away with planning restrictions altogether: let the people decide what their neighbourhoods look like. If you believe in the wisdom of crowds, the result is likely to be more complex and interesting than a community built from the imagination of one architect. In the district of Almere, on the outskirts of Amsterdam, such an experiment is underway. Holland is one of the most densely populated nations in Europe, so every inch of land needs to be managed and planned to cope with the demands of a growing population; yet in this unique neck of the woods it is still thought that allowing people to self-build their own homes may be the best way forward.


Super Thinking: The Big Book of Mental Models by Gabriel Weinberg, Lauren McCann

affirmative action, Affordable Care Act / Obamacare, Airbnb, Albert Einstein, anti-pattern, Anton Chekhov, autonomous vehicles, bank run, barriers to entry, Bayesian statistics, Bernie Madoff, Bernie Sanders, Black Swan, Broken windows theory, business process, butterfly effect, Cal Newport, Clayton Christensen, cognitive dissonance, commoditize, correlation does not imply causation, crowdsourcing, Daniel Kahneman / Amos Tversky, David Attenborough, delayed gratification, deliberate practice, discounted cash flows, disruptive innovation, Donald Trump, Douglas Hofstadter, Edward Lorenz: Chaos theory, Edward Snowden, effective altruism, Elon Musk, en.wikipedia.org, experimental subject, fear of failure, feminist movement, Filter Bubble, framing effect, friendly fire, fundamental attribution error, Gödel, Escher, Bach, hindsight bias, housing crisis, Ignaz Semmelweis: hand washing, illegal immigration, income inequality, information asymmetry, Isaac Newton, Jeff Bezos, John Nash: game theory, lateral thinking, loss aversion, Louis Pasteur, Lyft, mail merge, Mark Zuckerberg, meta analysis, meta-analysis, Metcalfe’s law, Milgram experiment, minimum viable product, moral hazard, mutually assured destruction, Nash equilibrium, Network effects, nuclear winter, offshore financial centre, p-value, Parkinson's law, Paul Graham, peak oil, Peter Thiel, phenotype, Pierre-Simon Laplace, placebo effect, Potemkin village, prediction markets, premature optimization, price anchoring, principal–agent problem, publication bias, recommendation engine, remote working, replication crisis, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, ride hailing / ride sharing, Robert Metcalfe, Ronald Coase, Ronald Reagan, school choice, Schrödinger's Cat, selection bias, Shai Danziger, side project, Silicon Valley, Silicon Valley startup, speech recognition, statistical model, Steve Jobs, Steve Wozniak, Steven Pinker, survivorship bias, The Present Situation in Quantum Mechanics, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, transaction costs, uber lyft, ultimatum game, uranium enrichment, urban planning, Vilfredo Pareto, wikimedia commons

For example, Netflix held a contest in 2009 in which crowdsourced researchers beat Netflix’s own recommendation algorithms. Crowdsourcing can help you get a sense of what a wide array of people think about a topic, which can inform your future decision making, updating your prior beliefs (see Bayesian statistics in Chapter 5). It can also help you uncover unknown unknowns and unknown knowns as you get feedback from people with previous experiences you might not have had. In James Surowiecki’s book The Wisdom of Crowds, he examines situations where input from crowds can be particularly effective. It opens with a story about how the crowd at a county fair in 1906, attended by statistician Francis Galton, correctly guessed the weight of an ox. Almost eight hundred people participated, each individually guessing, and the average weight guessed was 1,197 pounds—exactly the weight of the ox, to the pound! While you cannot expect similar results in all situations, Surowiecki explains the key conditions in which you can expect good results from crowdsourcing: Diversity of opinion: Crowdsourcing works well when it draws on different people’s private information based on their individual knowledge and experiences.


pages: 518 words: 49,555

Designing Social Interfaces by Christian Crumlish, Erin Malone

A Pattern Language, Amazon Mechanical Turk, anti-pattern, barriers to entry, c2.com, carbon footprint, cloud computing, collaborative editing, creative destruction, crowdsourcing, en.wikipedia.org, Firefox, game design, ghettoisation, Howard Rheingold, hypertext link, if you build it, they will come, Merlin Mann, Nate Silver, Network effects, Potemkin village, recommendation engine, RFC: Request For Comment, semantic web, SETI@home, Skype, slashdot, social graph, social software, social web, source of truth, stealth mode startup, Stewart Brand, telepresence, The Wisdom of Crowds, web application

Many of the tools and websites offer features and functions that support existing offline relationships and behaviors. These sites count on each person bringing his personal network into the online experience. The concept of tribes and friends has become more important than ever and has driven the development of many products. What was ho-hum in 1997 is now the core—for user features as well as opportunities for making money. Additionally, the power of the many, or the wisdom of crowds, is being leveraged to exert some control over content creation and self-moderation processes. Companies are learning that successful social experiences shouldn’t and can’t be overly controlled. They are learning they can leverage the crowd to do some of the heavy lifting, which in turn spares them some of the costs. User-generated content has helped many businesses and the participating community keep things moderated.


pages: 523 words: 112,185

Doing Data Science: Straight Talk From the Frontline by Cathy O'Neil, Rachel Schutt

Amazon Mechanical Turk, augmented reality, Augustin-Louis Cauchy, barriers to entry, Bayesian statistics, bioinformatics, computer vision, correlation does not imply causation, crowdsourcing, distributed generation, Edward Snowden, Emanuel Derman, fault tolerance, Filter Bubble, finite state, Firefox, game design, Google Glasses, index card, information retrieval, iterative process, John Harrison: Longitude, Khan Academy, Kickstarter, Mars Rover, Nate Silver, natural language processing, Netflix Prize, p-value, pattern recognition, performance metric, personalized medicine, pull request, recommendation engine, rent-seeking, selection bias, Silicon Valley, speech recognition, statistical model, stochastic process, text mining, the scientific method, The Wisdom of Crowds, Watson beat the top human players on Jeopardy!, X Prize

Terminology: Crowdsourcing and Mechanical Turks These are a couple of terms that have started creeping into the vernacular over the past few years. Although crowdsourcing—the concept of using many people to solve a problem independently—is not new, the term was only fairly recently coined in 2006. The basic idea is a that a challenge is issued and contestants compete to find the best solution. The Wisdom of Crowds was a book written by James Suriowiecki (Anchor, 2004) with the central thesis that, on average, crowds of people will make better decisions than experts, a related phenomenon. It is only under certain conditions (independence of the individuals rather than group-think where a group of people talking to each other can influence each other into wildly incorrect solutions), where groups of people can arrive at the correct solution.


pages: 525 words: 116,295

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

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, drone strike, 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, John Markoff, Julian Assange, Khan Academy, Kickstarter, knowledge economy, Law of Accelerating Returns, market fundamentalism, means of production, MITM: man-in-the-middle, mobile money, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, Parag Khanna, peer-to-peer, peer-to-peer lending, personalized medicine, Peter Singer: altruism, Ray Kurzweil, RFID, Robert Bork, 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: 481 words: 125,946

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

agricultural Revolution, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, artificial general intelligence, augmented reality, autonomous vehicles, basic income, 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, Douglas Engelbart, Elon Musk, Emanuel Derman, endowment effect, epigenetics, Ernest Rutherford, experimental economics, Flash crash, friendly AI, functional fixedness, global pandemic, Google Glasses, hive mind, income inequality, information trail, Internet of things, invention of writing, iterative process, Jaron Lanier, job automation, Johannes Kepler, John Markoff, 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, Satyajit Das, Search for Extraterrestrial Intelligence, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, social intelligence, 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: 405 words: 121,531

Influence: Science and Practice by Robert B. Cialdini

Albert Einstein, attribution theory, bank run, cognitive dissonance, conceptual framework, desegregation, Everything should be made as simple as possible, experimental subject, Mars Rover, meta analysis, meta-analysis, Mikhail Gorbachev, Milgram experiment, Norman Macrae, 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.


pages: 404 words: 124,705

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

assortative mating, 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, Kickstarter, longitudinal study, Mark Zuckerberg, medical residency, Menlo Park, meta analysis, meta-analysis, neurotypical, Occupy movement, old-boy network, place-making, Ponzi scheme, Ralph Waldo Emerson, randomized controlled trial, Ray Oldenburg, Silicon Valley, Skype, social intelligence, Stanford marshmallow experiment, 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: 482 words: 121,672

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

accounting loophole / creative accounting, Albert Einstein, asset allocation, asset-backed security, beat the dealer, Bernie Madoff, bitcoin, butter production in bangladesh, buttonwood tree, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, Detroit bankruptcy, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial innovation, financial repression, fixed income, framing effect, George Santayana, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Long Term Capital Management, loss aversion, margin call, market bubble, money market fund, mortgage tax deduction, new economy, Own Your Own Home, passive investing, Paul Samuelson, 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, stocks for the long run, survivorship bias, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond, zero-sum game

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: 487 words: 132,252

The Fry Chronicles: An Autobiography by Stephen Fry

Alistair Cooke, back-to-the-land, Desert Island Discs, Etonian, Isaac Newton, Live Aid, loadsamoney, pre–internet, Ronald Reagan, Saturday Night Live, Sloane Ranger, 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: 418 words: 128,965

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

accounting loophole / creative accounting, Alfred Russel Wallace, Apple II, barriers to entry, British Empire, Burning Man, business cycle, Cass Sunstein, Clayton Christensen, commoditize, corporate raider, creative destruction, disruptive innovation, don't be evil, Douglas Engelbart, Douglas Engelbart, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, John Markoff, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, road to serfdom, Robert Bork, Robert Metcalfe, Ronald Coase, sexual politics, 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, zero-sum game

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 in