The Effect of Social Influence on the Wisdom of the Crowd

May 18, 2011 By Aminda

A new study published by the Proceedings of the National Academy of Sciences, finds limitations on the premise that the average of many individuals’ estimates can be more accurate than that of individuals.

The Study, titled, “How social influence can undermine the wisdom of crowd effect” and led by Jan Lorenz of ETH Zürich, asked 144 Swiss students six questions about geography and crime statistics. As expected, the crowd’s average response to the questions was more right than the typical individual’s estimates.

However, the study found one big caveat that should be of interest to facilitators of crowdsourcing and innovation challenges. The crowd only produced positive results when participants were not kept informed of others’ opinions. If participants were told other people’s opinions during the experiment, then the wisdom of the crowd fell short. People migrated toward other people’s wrong opinion, says the study, and people who started out close to the wrong estimate grew more confident in their false beliefs.

The study finds that although groups are initially “wise,” knowledge about estimates of others narrows the diversity of opinions to such an extent that it undermines the wisdom of crowd effect in three different ways. The “social influence effect” diminishes the diversity of the crowd without improvements of its collective error. The “range reduction effect” moves the position of the truth to peripheral regions of the range of estimates so that the crowd becomes less reliable in providing expertise for external observers. The “confidence effect” boosts individuals’ confidence after convergence of their estimates despite lack of improved accuracy.

The wisdom of crowd effect, supported by examples from stock markets, political elections, and quiz shows, is valuable for society, but using it multiple times creates collective overconfidence in possibly false beliefs. While the wisdom of crowd effect is a statistical phenomenon, social influence can have an impact, concludes the study.

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Reader Comments

disruptive innovation and crowd wisdom go hand in hand. understanding the way that crowds affect people's decision making is crucial to understanding how new products either succeed or fail. Dave Lundahl of Insightsnow and Joel Rubinson are hosting a webinar on May 25th titled "Why New products Succeed".

It's amazing how inter-related the two topics are.
Posted by Erika on May 23, 2011

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