An example of wisdom of crowds failing?
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
Interesting enough the sub prime crisis which lead to the economic crisis we are experiencing now is somewhat an act of the wisdom of crowds. Issac Garcia pointed it our correctly over here. If this is the case, how can we prevent from such crap happening again? Rules and incentives as pointed out by Barry Schwartz can’t fix the problem. We need strong virtues and morals. However, if its that easy to get there, we won’t have that many wars going around in the world for many centuries. Web 2.0 is changing the mindset of people but can we get to utopia? I hope we can and I hope I can live to see such a day.
Jo said,
I think this is an example of the wisdom of crowds being ignored!
The democracy project is ongoing. The more information we get into the public domain, the less likely that vesed interests can create this kind of crisis.
Sean Lew said,
Jo, good point. I was just re-watching the video and it seems like its a mix of both being ignored and banks being selfish and government not doing anything and collectively we failed as an economy.
I am sure somewhere along the line, someone would have seen this coming. How could we make the wisdom of crowds more effective?
Isaac Garcia said,
Thanks for the props.
I tend to believe that people in the thick of it (namely the bankers and the politicians) DID see it coming. There were people in congress declaring that FannieMae and FreddieMac were overextended as early as 2002. But we (yes, we) all ignored it because we all wanted to keep watching our housing valuations going up.
Hell, we were all remodeling and adding rooms to our house with our equity lines of credit.
Then it all came crashing down.
Isaac Garcia said,
To answer your question, though, I believe that the answer is more transparency from the government, bankers and business.
Since the government is supposed to represent us, the citizens, then transparency should be a requirement.
But, as we’ve seen here recently in the USA with Congress passing an $800 billion dollar “stimulus package” that is FILLED with wasteful spending, earmarks and special projects – the lack of transparency is what prevented us citizens from having enough time to read and evaluate the “stimulus package” and contact our representatives.
Instead, it was rushed into Congress and signed over a holiday weekend….before even many of the government representatives who voted for (or against it) had an opportunity to read it.
Totally ridiculous and a prime example of a lack of transparency.
I’m very disappointed that the new administration in the US has already slipped into a “politics as usual” mode. Very disappointed.
Wiki’s encourage more openness – as do many other collaboration tools.
Sean Lew said,
Well, humans are inherently selfish and that’s what happened.
When I first started exploring E2, I have thought about this issue. http://www.bluethots.com/2008/04/30/democracy-and-collaboration/
Releasing information to the people and allowing them to decide on the best course of action, votes for it and the government executes the decision. Sounds like an excellent idea if people can digress all the information relating to all the issues being put up.
Some issues I can see are
1) Media will be an issue. Media might be skewed towards one opinion, marketing it well and influencing the outcome.
2) Transaction costs could be extremely high.
3) Also sometimes people just can’t decide. http://hbr.harvardbusiness.org/2008/11/when-teams-cant-decide/ar/1
4) Who would be doing the long term analysis and expert advise on issues the average joe can’t solve? In fact, the govt solves alot of these issues
5) the list goes on but I out of ideas
adamwho said,
Wisdom of crowds fails all the time. That is why we had to invent the scientific method… because human intuitions fail so often… even in crowds. Consider how many people don’t believe so many well verified scientific theories. GIGO (garbage in garbage out)
Where wisdom of the crowds work, is not in areas of factual knowledge but in areas where aesthetics matter… where the average person has something useful to say.
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