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this paper wisdom and Madness is
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actually about trying to resolve an
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interesting puzzle that's happened
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recently which is as of about 2012
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According to some measures more money
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goes to the Arts through Kickstarter the
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crowdfunding site than the National
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Endowment of the Arts the major
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government organization that gives money
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to the Arts so this sort of raised the
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big question what does that mean right
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does that mean we get more good art more
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bad art uh does more or get funded what
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happens when you switch from a pure
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expert based system to also having
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crowds
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involved this paper with Ramen Ananda
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who's a business school professor at
00:00:43
Harvard Business School and he and I
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work to get a group of professional
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judges people who judged things like the
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National Endowment of the Arts or who
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acted as expert critics or helped judge
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prestigious theater Awards and we asked
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them to evaluate Kickstarter projects to
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see whether or not their agreement would
00:00:59
agree with the ones that were funded by
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the crowd and what we found were a few
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interesting things first of all that the
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crowd and experts generally agreed so we
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thought at first there might be a big
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gap between what the experts liked and
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what the crowd liked it turns out there
00:01:11
wasn't they were very similar and where
00:01:13
they disagreed with each other the vast
00:01:15
majority of the times it was because the
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crowd was willing to fund projects that
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the experts were not a willing to so the
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crowd actually funded more art and had a
00:01:22
lower threshold and when we actually
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followed up what happened to these
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projects afterwards it appeared that
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projects funded by the crowd were
00:01:30
slightly more likely to fail but we also
00:01:32
appeared to be more likely to actually
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achieve giant success so winning
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prestigious theater Awards running off
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Broadway so the crowd actually seemed to
00:01:39
do a pretty good job of selecting High
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variance projects those had succeeded by
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a large amount or else
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failed when I think about what we were
00:01:50
trying to kind of measure here it was
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really answering a question that was
00:01:53
posed by two books that were published
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100 years apart so in the 1800s there
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was a book called uh The Madness of
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crowds delusions of The Madness of
00:02:01
crowds and that tried to look at things
00:02:03
like tulip Mania in Holland or Ponzi
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schemes and trying to understand why
00:02:07
crowds were so often crazy in 2004 James
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swii published a book called uh the
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wisdom of crowds all about how crowd
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markets are smarter than individuals and
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how we should do kind of group-based
00:02:16
decision- making and this is two really
00:02:18
interesting ideas contrasting with each
00:02:20
other on one hand you have crowds are
00:02:22
inherently crazy right and they they
00:02:24
suffer from Madness they run after
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interesting ideas and in theater you
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might think of that and some of our
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experts did think this would Happ happen
00:02:30
would would be that the crowd would tend
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to fund musicals about happy internet
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dancing cats right uh or about bacon
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kinds of things the internet likes right
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on the other hand you have this idea
00:02:40
that crowds are actually wise that
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collectively they're actually smarter
00:02:43
than individuals and they make great
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decisions and often better decisions
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than experts so what I think was
00:02:48
interesting to us was that we found a
00:02:50
lot more support for the wise crowd than
00:02:52
the Mad crowd even in this area which is
00:02:54
so subjective like theater
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more and more decisions that used to be
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in the hands of experts are also being
00:03:04
put in the hands of Internet online
00:03:05
communities so you could think about
00:03:07
crowdfunding and how it's replacing
00:03:09
expert judgment in theater or how it's
00:03:11
replacing venture capital in some cases
00:03:13
there's the idea of crowd science um the
00:03:15
crowd sourcing so there's a whole bunch
00:03:17
of things that we used to do as experts
00:03:20
and now we throw to communities to help
00:03:21
us solve and we don't know a lot about
00:03:24
when communities are better than experts
00:03:26
and when they're the same and I think
00:03:27
one of the interesting findings here is
00:03:29
even in this very subjective field of
00:03:30
theater where you'd really expect a huge
00:03:32
High culture low culture difference
00:03:34
right so the things that a theater snob
00:03:36
would like would be very different than
00:03:38
what the mass Market would like even in
00:03:40
this case it seems like the crowd has
00:03:41
value in adding to decisions it helps
00:03:43
actually lower barriers and democratize
00:03:46
access so I think that's a really
00:03:47
important point that would probably
00:03:48
apply even more in other specialized
00:03:54
Fields so what's actually interesting is
00:03:57
despite the sort of famous book on the
00:03:58
wisdom of crowds most of the work on why
00:04:01
Crowds Are smart or not has tended to
00:04:03
kind of revolve around um expert markets
00:04:06
where you have experts making decisions
00:04:07
and there's been some really interesting
00:04:08
work by Shane Greenstein and others
00:04:10
looking at things like Wikipedia and
00:04:12
finding that Wikipedia is smart but it's
00:04:14
a remarkably under kind of researched
00:04:16
field and so uh crowdfunding is
00:04:18
relatively new there's relatively little
00:04:19
work on that and this whole idea of
00:04:21
testing wisdom Madness is relatively
00:04:23
novel so I think it's a a first step to
00:04:25
trying to understand this increasingly
00:04:27
important phenomenon
00:04:32
so I'm really interested in crowds in
00:04:34
general and how internet communities
00:04:37
operate how we can make them work better
00:04:39
what uh expert and standard
00:04:41
organizations can they substitute for
00:04:43
and I think we have a huge amount of
00:04:44
questions right the internet is a
00:04:46
relatively new phenomenon in academic
00:04:47
terms uh we're still kind of grappling
00:04:49
with what does it do what does it enable
00:04:51
that we couldn't do before how could
00:04:53
companies use it how can governments use
00:04:54
it how can individuals participate in
00:04:56
these environments in a way to make a
00:04:57
difference how do we stop negative
00:04:59
behavior there's a huge amount of
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interesting questions and I'm really
00:05:02
excited to try and dig into
00:05:10
[Music]
