10 Reasons Why the Crowd is Not Your Friend
TwitScoop, tag clouds, crowd-sourcing, flash mobs, prediction markets… at least a couple of these things sound like they should be useful tools. But as some have pointed out, aggregated knowledge often turns out to be nonsense where the future is concerned.
- A short-term trend is really just noise.
- Crowds follow leaders, but:
- The mere fact of leadership does not validate, by itself, a direction.
- Popularity can often trump reason.
- After a certain inflection point, trends can generate their own steam, amplifying a false signal.
- Mobs are not, generally, known for tendency to consider unintended consequences.
- Stripping a problem of its complexity, so that judgment can be rendered by thousands of people simultaneously, often produces an irrelevant answer.
- Early results in prediction markets – when they would be most useful – fail to predict alternative, as yet unforeseen outcomes.
- In order to get useful input from a large sample of market participants, the problem set has to be readily understandable (see #7.)
- Self-awareness of their impact on the outcomes they are predicting should, eventually, muddy the predictive waters enough to make them useless.
If I were a betting man, I’d say less than 1/2 of these eventually turn out to be provably true.
To be equitable, I’ll try to come up with a few examples of how crowd-based decision making might actually be useful.
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