[Marxism] Is Forbes going Maoist ? James Surowiecki on the mass line

Jurriaan Bendien andromeda246 at hetnet.nl
Thu May 27 23:17:20 MDT 2004


(...) What Google is relying on is something I call the wisdom of crowds:
Under the right circumstances, groups are smarter, make better decisions and
are better at solving problems than even the smartest people within them. On
any one problem a few people may outperform the group. But over time
collective wisdom is near-impossible to beat. No one, you might say, knows
more than everyone.  You can see this phenomenon at work in examples ranging
from the trivial to the genuinely weighty. Finance professor Jack L.
Treynor, for instance, devised an experiment in which he asked his students
to guess how many jellybeans were in a jar and found that the group's
average guess was off by just 2% even though very, very few of the students
were that close. Or consider the show Who Wants to Be a Millionaire. When a
contestant on the show is stumped by a question, he has a couple of choices
in asking for help: the audience or someone he's designated as an expert.
The experts do a reasonable job: They get the answer right 65% of the time.
But the audience is close to perfect: It gets the answer right 91% of the
time, even though it's made up of people who have nothing better to do than
sit in a TV studio and watch Regis Philbin. More strikingly, groups also
seem to do a good job of forecasting the future. The Iowa Electronic Markets
is an online market where people can buy and sell contracts based on how
they think presidential candidates will do. Since 1988, when it was created,
the market's forecasts have been more accurate than those of polls
three-quarters of the time, even though poll questions and results are
fashioned by professional pollsters, while the Iowa market is open to just
about anyone. The wisdom of crowds can be seen at the racetrack, where the
odds on horses coincide very nicely with their probability of winning. (That
is, if you look at a large collection of horses that went off at 4-1 odds,
you find that 20% won.) And, of course, collective wisdom is also at work in
markets, which is why it's so hard to outperform the market over time. Just
as Google's PageRank encapsulates the knowledge of Web users, so does a
market price embody, as the economist Friedrich Hayek suggested, all of the
tacit knowledge and wisdom of investors and traders. Of course, markets are
also known for being subject to manias and panics, fads and mass hysterias.
Why do these occur? For the crowd to be intelligent, the people within it
have to be making decisions on their own, while drawing on diverse sources
of information. During a bubble or panic, people's decisions become
dependent on others'--"If they're selling, I better sell, too"--and
diversity vanishes as people get caught up in the prevailing frenzy. But a
crowd is wisest, it turns out, when its members act independently. Google's
success, then, is far from an interesting quirk. Instead, it's relevant to
just about any problem-solving situation. As long as you're asking a
question that has a right answer--including questions like, "Should we
acquire this company?" or "Is there a market for this new product?"--and as
long as people are making judgments on their own, collective intelligence
will get you the best answer possible. Google, and it shall be given.

James Surowiecki, author, The Wisdom of Crowds: Why The Many Are Smarter
Than The Few And How Collective Wisdom Shapes Business, Economies, Societies
And Nations.
Complete story at: http://www.forbes.com/global/2004/0524/019.html
Further reference: Hugh C. Lauder, Capitalism and social progress
(Palgrave).

Things ain't cooking in my kitchen
Strange affliction came over me
Julius Ceasar, the Roman Empire
Couldn't conquer the blue sky
Well there's a small boat made in china
It's going nowhere on the mantlepiece
Well do I lie, like a loungeroom lizard
Or do I sing, like a bird released
Everywhere you go,
You always take the weather with you

- Crowded House









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