Sharing Information Corrupts Wisdom of Crowds

http://www.wired.com/wiredscience/2011/05/wisdom-of-crowds-decline/

By Brandon Keim May 16, 2011 | 6:30 pm

When people can learn what others think, the wisdom of crowds may veer towards ignorance.

In a new study of crowd wisdom — the statistical phenomenon by which individual biases cancel each other out, distilling hundreds or thousands of individual guesses into uncannily accurate average answers — researchers told test participants about their peers’ guesses. As a result, their group insight went awry.

“Although groups are initially ‘wise,’ knowledge about estimates of others narrows the diversity of opinions to such an extent that it undermines” collective wisdom, wrote researchers led by mathematician Jan Lorenz and sociologist Heiko Rahut of Switzerland’s ETH Zurich, in Proceedings of the National Academy of Sciences on May 16. “Even mild social influence can undermine the wisdom of crowd effect.”

The effect — perhaps better described as the accuracy of crowds, since it best applies to questions involving quantifiable estimates — has been described for decades, beginning with Francis Galton’s 1907 account of fairgoers guessing an ox’s weight. It reached mainstream prominence with economist James Surowiecki’s 2004 bestseller, The Wisdom of Crowds.

As Surowiecki explained, certain conditions must be met for crowd wisdom to emerge. Members of the crowd ought to have a variety of opinions, and to arrive at those opinions independently.

Take those away, and crowd intelligence fails, as evidenced in some market bubbles. Computer modeling of crowd behavior also hints at dynamics underlying crowd breakdowns, with he balance between information flow and diverse opinions becoming skewed.

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Exacerbating it all was the “confidence effect,” in which students became more certain about their guesses.

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