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Welcome About Lehman Associates Services Presentations and Articles Our Customers Home Call Us Today 1-888-221-0081 Or Send an Email Tlehman@ansible.com		Collective Wisdom © Tom Lehman, 2007 Wondering what the economic climate will be for a given industry in 2008? How about the actions the Congress is likely to take this year related to global warming? Will the EU take action this year to ease telcom regulations in Europe ? Find an expect, right? They are the people best suited to give you an answer. Well, maybe not. Emerging research on knowledge markets suggests that the collective wisdom of a large number of people with varying degrees of knowledge on a particular subject are frequently better able to predict outcomes than the most knowledgeable among them. A few examples from The Wisdom of Crowds, by James Surowiecki include: When the nuclear submarine Scorpion was lost in the north Atlantic , the possible search area was approximately 400 square miles. No one knew what had happened, how quickly the submarine sank, or how long after the last radio and position check the accident occurred. Yet a small group of individuals with expertise in a range of related areas, individually predicting these and other elements were able to collectively pinpoint the most likely location of the Scorpion within 200 yards of where it was eventually discovered. A political “stock market” experiment operating at the University of Iowa frequently predicts political contests more accurately than polls even in races in other regions of the country or in other countries. When applied over several trials, the group average of guesses for the number of beans in a jar consistently outperforms any one of the individuals in the group. Immediately following the Challenger accident, all of the major NASA contractors took a hit in the stock market. Within days, however, all had recovered except Thiokol, the supplier of the solid fuel boosters. It would seem that investors had already figured out the most likely cause of the accident long before there was any official conclusion by NASA. Studies seem to suggest that not only are groups are collectively wise, but that experts are frequently wildly off the mark. They tend to hold onto opinions too long after evidence emerges that might suggest otherwise, and too slow to formulate new opinions based on the new information. Experts have an emotional and professional investment in being both consistent and right. These professionals want to stand out from their colleagues and may take more extreme or contrarian positions as a result. What started as academic investigations into the dynamics of group knowledge has mushroomed into a new approach to forecasting and risk assessment. Potential applications abound. Some of the techniques have been used for many years without linking it to a larger concept. Industry studies have long asked C-level executives across the industry to estimate industry growth, employment, and profitability. Frequently the averages of these individual predictions have proven more accurate than the wisdom of economic analysts who presumably have more information and a better sense of the picture of the industry as a whole. It turns out that membership organizations are in a perfect position to take advantage of these new techniques since assembling a representative group is one of the greatest challenges. The criteria for wisdom groups is that they are diverse with varying levels of expertise and knowledge within the given topic area. However, the individuals within the group must have some knowledge or experience on which to base their views. Certainly to predict the future of the nanotechnology industry, one has to at least be familiar with the concepts and technologies involved. Association membership is a good fit. It is diverse with many different levels of expertise and experience, but a shared core of knowledge around an industry or profession. The challenge is to develop models for how to apply this collective wisdom to gain advantage for the members and for the organization. Possibilities include expanded industry studies, information to support lobbying and policy positions, a different approach to member satisfaction and needs assessments, development or environmental forecasting, and others. Tom Lehman is president of Lehman Associates, LLC, a management consulting firm that partners with association executives to improve organizational performance through insight, strategy, and the application of information technology.

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Collective Wisdom

Wondering what the economic climate will be for a given industry in 2008? How about the actions the Congress is likely to take this year related to global warming? Will the EU take action this year to ease telcom regulations in Europe ? Find an expect, right? They are the people best suited to give you an answer. Well, maybe not.

Emerging research on knowledge markets suggests that the collective wisdom of a large number of people with varying degrees of knowledge on a particular subject are frequently better able to predict outcomes than the most knowledgeable among them. A few examples from The Wisdom of Crowds, by James Surowiecki include:

When the nuclear submarine Scorpion was lost in the north Atlantic , the possible search area was approximately 400 square miles. No one knew what had happened, how quickly the submarine sank, or how long after the last radio and position check the accident occurred. Yet a small group of individuals with expertise in a range of related areas, individually predicting these and other elements were able to collectively pinpoint the most likely location of the Scorpion within 200 yards of where it was eventually discovered.

A political “stock market” experiment operating at the University of Iowa frequently predicts political contests more accurately than polls even in races in other regions of the country or in other countries.

When applied over several trials, the group average of guesses for the number of beans in a jar consistently outperforms any one of the individuals in the group.

Immediately following the Challenger accident, all of the major NASA contractors took a hit in the stock market. Within days, however, all had recovered except Thiokol, the supplier of the solid fuel boosters. It would seem that investors had already figured out the most likely cause of the accident long before there was any official conclusion by NASA.

Studies seem to suggest that not only are groups are collectively wise, but that experts are frequently wildly off the mark. They tend to hold onto opinions too long after evidence emerges that might suggest otherwise, and too slow to formulate new opinions based on the new information. Experts have an emotional and professional investment in being both consistent and right. These professionals want to stand out from their colleagues and may take more extreme or contrarian positions as a result.

What started as academic investigations into the dynamics of group knowledge has mushroomed into a new approach to forecasting and risk assessment. Potential applications abound.

Some of the techniques have been used for many years without linking it to a larger concept. Industry studies have long asked C-level executives across the industry to estimate industry growth, employment, and profitability. Frequently the averages of these individual predictions have proven more accurate than the wisdom of economic analysts who presumably have more information and a better sense of the picture of the industry as a whole.

It turns out that membership organizations are in a perfect position to take advantage of these new techniques since assembling a representative group is one of the greatest challenges. The criteria for wisdom groups is that they are diverse with varying levels of expertise and knowledge within the given topic area. However, the individuals within the group must have some knowledge or experience on which to base their views. Certainly to predict the future of the nanotechnology industry, one has to at least be familiar with the concepts and technologies involved. Association membership is a good fit. It is diverse with many different levels of expertise and experience, but a shared core of knowledge around an industry or profession.

The challenge is to develop models for how to apply this collective wisdom to gain advantage for the members and for the organization. Possibilities include expanded industry studies, information to support lobbying and policy positions, a different approach to member satisfaction and needs assessments, development or environmental forecasting, and others.

Tom Lehman is president of Lehman Associates, LLC, a management consulting firm that partners with association executives to improve organizational performance through insight, strategy, and the application of information technology.

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