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Everyone Agrees: Crowdsourcing Sucks

Are you sure there's wisdom in that crowd? Here's why you should reconsider putting crucial business decisions up for a vote.
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You're in a crowded theater. Suddenly, a man in the front row has some sort of serious medical emergency--cardiac arrest, let's say. Which of the following choices seems like the best course of action?

A. Rush to the front of the house and begin treating him.

B. Shout out, "Is there a doctor in the house?"

C. Call 911.

D. Ask everyone in the theater to work together, develop a consensus diagnosis, and decide what to do.

If you answered "A," congratulations. You're a brave soul and a man or woman of action, the type to race toward the sound of the guns. (We hope you have some medical training, though.)

Did you answer "B" or "C"? Nice work--both are excellent choices.

But if you chose "D," perhaps you'd better read the rest of this article. In fairness, "D" is pretty close to what a lot of trendier, so-called business leaders seem to suggest you should do.

The Crowd Is Bad at Predictions

Recently, the U.S. Supreme Court upheld Obamacare. (You might have seen this somewhere in the news; it got just a little bit of coverage here and there.) What is especially interesting for our purposes, however, is that almost nobody predicted the actual outcome.

More to the point, pundits across the board failed to predict accurately. And, as The New York Times pointed out this week, the prediction-market website Intrade got things flat out wrong. Even as some Washington insiders began to hear gossipy speculation that maybe the court would in fact uphold the law, Intrade "continued to show about a 75% chance that the law's so-called mandate would be ruled unconstitutional, right up until the morning it was ruled constitutional."

So, why does this matter for you as an entrepreneur? Well, there's much talk these days about the "wisdom of crowds" and crowdsourcing. The U.S. government solicits crowdsourced ideas for products to solve problems in just about every federal program. (Check out http://challenge.gov if you haven't seen this before, or this article about how the Pentagon and intelligence agencies are trying to crowdsource proposals for better intelligence gathering.)

Even the much-touted "lean start-up" principle that encourages entrepreneurs to develop minimum viable products rests on "crowd knowledge." But how much does the crowd really know?

The plain truth is that the crowds predict the wrong outcomes--often.  Look at these examples:

GOP Retention of Senate in 2006
Michael Jackson Trial Results
Morgan Stanley CEO Philip Purcell's resignation
Howard Dean's Iowa Primary
2004 presidential candidate debates
Election day trading frenzy 

Ask the Right Questions to the Right People

OK, so, insights: Ask a bunch of people to bet on what they think the best movies will be, and they might get it right. Ask them who will win an election, and they have very poor odds on it. And then take the health care case, for example. Asking the public to predict the votes of nine jurists they probably can't even name seems about as smart as trying to get the audience that is gnawing on Twizzlers or Milk Duds at the movie Ted to agree on how to handle a hypothetical heart-attack victim.

It stands to reason that if the individuals within the crowd actually have unique insights, then maybe there's value in their crowdsourced conclusions. If you were to gather opinions from serious students of the Supreme Court, then maybe you'd get better results. It also stands to reason that if you ask people things they're likely to know about personally--the movies they watch, which politicians they're going to vote for--you'll get better data.

All of which brings us back to two of the fundamental points we make in our book, Breakthrough Entrepreneurship. First, as an entrepreneur, you need to develop a true, unique insight. And second, go out and get maximum information for minimum cost.

Viewed in that light, crowdsourcing looks almost like the opposite of entrepreneurship. In fact, it seems downright lazy, whether you're trying to save a life or change the world.

Last updated: Jul 12, 2012

JON BURGSTONE | Columnist | Professor, UC Berkeley

Jon Burgstone was co-founder of SupplierMarket, acquired by Ariba for $1.1B. He now teaches at Berkeley, where he helped launch the Center for Entrepreneurship & Technology. He is co-author of Breakthrough Entrepreneurship.

BILL MURPHY JR. | Columnist

Bill Murphy Jr. is a journalist, ghostwriter, and entrepreneur. He is the author of Breakthrough Entrepreneurship (with Jon Burgstone) and is a former reporter for The Washington Post.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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