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