Using the “Wisdom of the Crowd” to Make Good Decisions

In this Harvard Business Review article, Alex “Sandy” Pentland (M.I.T.) warns leaders to avoid two common errors when making important decisions: working in isolation and following the herd. Successful decision-makers, he says, engage in social exploration – reaching out and forming connections with many different kinds of people, exposing themselves to a broad variety of thinking, paying attention to what the most successful people are doing, and looking for the sweet spot that represents the best decision. Social explorers, says Pentland, “winnow down the ideas they’ve gathered by bouncing them off other people to see which ones resonate. Generally, those ideas are micro-strategies – examples of actions that might be taken, circumstances conducive to the action, and possible outcomes. Then, by assembling a great set of micro-strategies, social explorers make good decisions.” 

In small but important ways, organizations can encourage interaction. One company tweaked the timing of coffee breaks, making it easier for more people to talk to one another, and saw productivity improvements that saved $15 million. Another company made its lunch tables longer, encouraging people to interact with those they didn’t know, and saw productivity increase by 5 percent. 

One possible downside of social interaction is group-think, which happens when people are all drawing on the same source or sources of information and get the echo-chamber effect. This is why talking to a variety of people is so important, managing the idea flow and zeroing in on the wisest course of action. This applies in a variety of fields, says Pentland: “Getting the right idea flow is critical in journalism (so reporters talk to enough sources to get all sides of the story), financial controls (to ensure that all sources of fraud have been considered), and ad campaigns (so companies sample a sufficiently diverse set of customer opinions).”

“Beyond the Echo Chamber” by Alex “Sandy” Pentland in Harvard Business Review, Nov. 2013 (Vol. 91, #11, p. 80-86), http://hbr.org/2013/11/beyond-the-echo-chamber/ar/1; see Memo 429 for a related article by Pentland, “The New Science of Building Great Teams.”

From the Marshall Memo #507