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The Wisdom of the Crowd Theory - A Definitive Guide


The wisdom of the crowd theory is built on the crowd.


You probably have encountered the wisdom of the crowd theory. But what is it? How does it work? Good questions and you have come to the right place. In this comprehensive guide, we will know them all. Are you ready? Keep reading for more information!


"The wisdom of the crowd is the idea that a large group of individuals is smarter than individual experts."


Wisdom of the Crowd: Explained


Although it sounds cliche, there is real power in numbers embedded in every aspect of life. Whether you're developing an idea or spreading a message, you have a higher chance of making it a success when you depend on a group of people. 

Referred to as the crowd's wisdom, the concept has been one of the best ways to complete tasks and make SMART goals happen. 

With the collective thought from a group of individuals, a wide variety of techniques can be generated to help people understand something ambiguous and unclear. This allows them to share more diverse, creative, and realistic ideas, resulting in quality, immediate, and long-term results at the end of the day. 

What is the wisdom of the crowd? Well, it is the idea that a large group of individuals is smarter than individual experts. This is especially true in decision-making for the decision-makers, predicting, innovating, and even problem-solving. 

Popularized by James Surowiecki, the concept explains how large groups have made a superior impact in a wide variety of fields, including pop culture, behavioral economics, psychology, and biology. 


The wisdom of the crowd theory explained.


Why a Bunch of People are Smarter than Individual Experts?

Over the years, the wisdom of the crowd theory has led to debates in different corners of the globe. Some critics say the concept needs further research and studies to prove its effectiveness. 

Still, we cannot deny the fact of the possibility of generating quality and different ideas. But why are groups of people smarter than individual experts? In this section, you will know a few reasons highlighted below. 


Solve Cognitive Problems 

Generally, collective wisdom can help solve cognitive problems. For example, let's say a crowd and an individual are asked to guess the number of beans in a jar. Who do you think will get the nearest answer? 

Is it the crowd? Is it the individual? Based on research, many people have a higher chance of guessing the nearest answer than the latter. This helps overcome cognitive problems, lead to good results, avoid hassles, promote productivity, and boost convenience over time. 


The wisdom of the crowd theory can solve cognitive problems.


Reflect on Diversity of Opinions 

Generally, experts tend to think alike. They might not reflect on a range of opinions. A bunch of people, on the other hand, is far different. Whatever ideas they obtain from the crowd, they never forget to reflect in order to come up with a better and more practical solution for a problem. 


Two people made of wood standing as an illustration to diversity.


They are Internally Consistent 

Individual experts might be internally inconsistent. They might experience a hard time calibrating their position. Also, they tend to be overconfident with themselves, making them close-minded and incapable of accepting new ideas from others. 

On the contrary, when choosing individually, the crowd is likely to decide by authority, leading to less bias and conformity within the group since there is less social influence. 


Why Many People from Different Fields Consider Wisdom of the Crowds 


Since the popularity of the wisdom of the crowd theory, a lot of individuals from a range of fields have integrated the concept into their daily life, and the number is expected to increase in the future. 

What makes the theory worth the cost? Why did business owners and professionals begin applying the wisdom of the crowd? Here are some of its possible benefits: 


A Combination of Independent Judgments is More Accurate than Ever

It's always tiring and overwhelming to estimate how your market will grow in the coming years. Finding the most effective strategy to stand out from competitors is no exception, especially when other businesses are well-established. 

One popular and reliable approach to make your goals happen is to turn to the wisdom of the crowd. Of course, you might be ashamed and afraid when relying on others. But that's how the world works. You cannot succeed without the help of people. 

Asking individuals for their suggestions, feedback, and opinions will open more opportunities to study your competition and grow professionally. 

Once you have gathered people's stance about something, your job does not stop there. It's time to combine all ideas you have obtained. This allows you to make decisions that best match your unique needs and requirements. 

Evidence indicates that the combination of independent judgments is more accurate, effective, and relevant than an individual's judgment. 


Useful Risk Management 

Let's admit it! Managing risks in most aspects of life is difficult. It's never easy. Even licensed professionals do experience some troubles along the way. 

But there's a way to manage risks as effectively as possible. While there are many factors to weigh in mind, it is crucial to involve many experts throughout the process. It's good you understand the risks. 

But nothing can beat the knowledge and expertise of a bunch of individuals. They would not only analyze risks but also manage them without compromising the quality of results. Indeed, no one knows as much as everybody. 


Useful risk management


Handle any Problem Solving Tasks with Confidence

Aside from managing risks, solving other problems might be a headache for beginners and experts.

Although it sounds easy, it is not as simpler as you thought in reality. This is where the wisdom of the crowds can play a critical role. 

As you listen or read opinions from others, you'd be able to think of new ideas that would solve your problems like a pro.

Sometimes, it might hurt to receive feedback and criticisms from others. It's normal, and it's part of the process. Don't be close-minded. The trick is to accept suggestions and incorporate them into your business operations/transactions. 


Make Decisions Without Compromising Quality Results

Just like problem-solving, the making decisions process requires time and effort. It does not happen in an instant. You have to weigh different factors in mind to come up with a quality and risk-free decision. 

In other circumstances, you might not think as you're used to. Perhaps, you are quite overwhelmed with operations. Probably, you are exhausted studying the niche of your choice. 

Whatever your case might be, the wisdom of the crowd can enlighten your mind, consider risks, and decide on important matters effectively. 


Predict the Future 

Another advantage of the wisdom of the crowd is that you might predict the future, prepare for challenges along the way, minimize potential risks, make your objectives a reality, stand out from the competition, and increase a good return on investment. 

As a starter, it would be challenging to study the market and discover its future. But it has never been easier with the wisdom of the crowd theory. Having people to share ideas with can be a lifesaver. 


Predict the future with a crystal ball.


It's Cheaper than You've Expected

Are you searching for a way that will guide you to solve problems at a competitive rate? Don't look further than the wisdom of the crowds. 

If you have something to ask or verify, don't deal with it alone. There are individuals you can rely on and trust from start to finish. 

Apart from the accuracy of the information, the concept would enable you to avoid unnecessary expenses and save some cash in the long run.

While you're able to fix a problem, you can also acquire the bigger savings you deserve. 


Sir Francis Galton 

There are many popular people who share their thoughts on the wisdom of the crowd. Sir Francis Galton is one of the famous names.

In 1907, Sir Francis Galton observed a festival competition in Cornwall. The contest was about guessing the actual weight of an ox. All 787 guesses, however, were wrong. 

But when Sir Francis Galton calculated the mean of all guesses, he got 1,197 pounds, which was quite close to the ox's weight. This theory was called collective wisdom. 

Aside from being considered the father of modern collective intelligence, Sir Francis Galton was an eminent scientist in the 19th century. 


Sir Francis Galton who discovered the wisdom of the crowd


As a scientist, he made significant contributions to a wide variety of subjects, including forensics, psychology, statistical methods, and forensics. 

Although years had passed, his findings are still used in both medicine and science. He was a polymath, psychometrician, sociologist, proto-geneticist, anthropologist, meteorologist, tropical explorer, inventor, and geographer. He was also a cousin of Charles Darwin. 


Sir Francis Galton has produced more than 340 papers and books. He created the statistical concept of regression toward the mean and correlation. 

He introduced the use of surveys and questionnaires for gathering information on human communities.  

He was the first expert who applied statistical methods to the study of the inheritance of intelligence and human differences. 


The O.X. is the most famous example of the wisdom of the crowd.


The Wisdom of the Crowds: How Does it Work? 

The wisdom of the crowds provides many possibilities. It can help solve cognitive problems, provide accurate judgment, manage potential risks, allow people to make decisions with confidence, and predict the future without investing thousands of dollars. 

However, the wisdom of crowds has some drawbacks. When not used properly, the concept might lead to peer pressure and self-censorship. 

Peer pressure takes place, especially when people in a group disagree with other thoughts and opinions. 

Self-censorship happens when a group member restrains himself/herself from expressing ideas.

Now, how to make the concept work? How to get the most out of the wisdom of the crowds? Here are some criteria to take into consideration: 


How does the wisdom of the crowd works?


Diversity of Opinion 

Collective decisions are good when they are made by people with diverse opinions, according to Surowiecki. 

A group of individuals must be able to draw different beliefs and backgrounds based on private information. 

It is critical to have a diverse group and a diverse set of guesses to come up with good conclusions they can use in real-life situations. 

When Sir Francis Galton watched a festival contest in Cornwall, the participants were composed of a range of individuals. The group consisted of farmers, homemakers, butchers, and livestock experts. 

With the diversity of opinions, one can have access to different perspectives, which can encourage a more worldly view. It fosters mutual respect, increases adaptability, and promotes global awareness at the end of the day. 

On the other hand, limited opinions can affect the process of making decisions, solving problems, and handling other daily life situations. 

Wisdom of the crowds is effective when there are enough group members whom you can ask for opinions and suggestions. This diverse group of individuals can predict the outcomes when.


Independence of Opinion 

Another criterion in making the concept work is the independence of opinion. 

If diversity of opinion comes from different group members, how does independence of opinion work? 

It indicates that individuals' ideas are neither determined nor affected by the other's feedback or suggestions. 

That means people come up with a thought based on their perspectives, experiences, and expertise as well. 

Once independence of opinion is maintained in this theory, erroneous and expensive outcomes can be easily avoided as the crowd's independence can result in predicting the correct decisions. 

If the feedback from a bunch of individuals is not independent, it might lead to herding behavior. 

Some studies indicate that a lack of independence might not be damaging. Measuring the crowd Within, written by Pashler and Vul, showed that asking the same individual might improve expected outcomes. But this claim needs further research to prove. 



Another factor to make the wisdom of the crowd wise is the presence of aggregation. What is it really? 

An aggregation method is a process of bringing many contributions of group members together to create a collective output. 

During a festival competition in Cornwall, Sir Francis Galton used the median of all group decisions to come up with that group's final collective decision. 

How does aggregation make the theory work? Well, an aggregation of both analytical and intuitive judgments leads to accurate estimates. 

In the world of business, for example. Teams have to prevent a person from forming an opinion on her/his own. 

It is always essential to gather and evaluate subordinates' ideas for a better outcome. Always listen to what other people say as it might change everything.



Decentralization is another aspect of a wise crowd. 

Commonly known as the distribution of power and decision-making authority to group members, decentralization is a perfect way to make the concept work. 

While decentralization can lead to disaster, it can be good, according to Surowiecki. 

When done properly, decentralization fosters specialization as group members will have the opportunity to develop expertise and pursue their interests. 

This diversity of interests lead to greater efficiency. 

Decentralization can also promote tacit knowledge, which is information processed by group members. 

Although the data cannot be explained, it can be applied. 

Surowiecki also added that decentralization promotes specialization and independence. It encourages camaraderie and collaboration among members. 

However, decentralization might not have the central authority to ensure that every piece of information is properly distributed. 


Real Amazing Examples of Wisdom of the Crowds


The Story of the Stock Market's Reaction to the Challenger Explosion 


Who would easily forget the story of the stock market's reaction to the Challenger? The accident spread as the launch of the space shuttle Challenger was televised. 

Within minutes since the incident, investors began dumping the stocks of the major contractors who were part of the space shuttle launch. These are composed of Rockwell International, Martin Marietta, Morton Thiokol, and Lockheed. 

Lockheed's stock, for example, was down around 5%. Martin Marietta's stock declined by up to 3%. Rockwell's stock decreased to 6%. 

The stock of Moron Thiokol, on the other hand, was extremely affected. Investors were trying to sell stocks. But only a few people were interested. As a result, the trading was immediately halted. After an hour since the explosion, the stock was declined to 6%. At the end of the day, the decline has doubled because the stock market made the company accountable for the Challenger disaster. 


Jelly Beans 

Another great example of the wisdom of the crowd is the jelly bean experiment. 

Fill any jar with jelly beans. Then, let a number of people guess the number of beans. If they work on a problem together and talk to each other, the group's estimate will be better than individual guesses. 

Finance professor Jack Treynor did the same experiment in his class. He filled a jar with approximately 850 beans. The average individual guesses were 871, which was very close to the jar's total number of jelly beans. Meaning, even though individually most of the people were far from the correct answer, the group estimation was only 2.5% far from the correct answer.


The jelly beans jar experiment of the wisdom of the crowds.



Aside from the Challenger explosion, the U.S. navy lost its submarine on May 22, 1968, but unable to find the wreckage. A naval officer named John Craven decided to apply the wisdom of the crowd theory. 

What he did was that he asked a group of salvage experts and mathematicians to guess the location of the submarine. The guess was around 220 yards. After an extensive search, the Scorpion submarine was successfully found. 


Finding a Submarine in the sea with the wisdom of the crowds.


SARS Epidemic 

In 2002, 305 individuals in Guangdong Province of China suffered a respiratory disease. Five of them died, according to reports.

Although the symptoms were quite similar to the flu, the WHO named the new contagious disease the SARS epidemic. 

While it was clear that the epidemic was transmitted from direct contact to an infected patient, the World Health Organization made an effort to discover the cause of SARS. Particularly, WHO contacted eleven research labs from countries across the globe. These are composed of China, France, the United Kingdom, Germany, Canada, the Netherlands, Singapore, Japan, Hong Kong, and the United States. 

They were asked to work together in order to analyze the virus. Every day, they shared their work and even debated on current outcomes. 

The collaboration from eleven research labs has led to effectiveness and speed. 


The Development of the U.S Auto Industry

Another situation where the wisdom of the crowd theory is applied is the development of the U.S auto industry. 

Fiat Automobiles Spa, for example, sought inspiration from different bloggers for its 500 world cars. Instead of relying on internal decisions, they gather opinions from a bunch of bloggers on what colors, features, models, and other extra bundles their new vehicles should have. 

While Fiat Automobiles Spa asked bloggers, General Motors Corp conducted a poll to identify which of their three minicars should be provided throughout the North American market. 



During the SARS epidemic, the WHO contacted eleven research lab centers to discover the virus's cause. 

In COVID-19, the collective knowledge of a crowd has also been utilized, especially in forecasting scenarios throughout social or data sciences. 

Before the outbreak of COVID-19, there were scientific activities by the wisdom of the academic crowd utilized by many organizations in all corners of the world. 

On January 7, 2020, some authorities in China conducted genome sequencing to determined that the disease was caused by the novel Coronavirus. 



The festival contest in Cornwall, where Sir Francis Galton observed, is another example of the wisdom of the crowd theory. 

Like jelly beans, participants composed of livestock experts and farmers were asked about the ox's actual weight. 

Yes, their individual guesses were wrong. But Sir Francis Galton took the median of the individual guesses and came up with an answer that's close to the ox's weight. 



Aside from the auto industry, the wisdom of the crowd has been used in the cryptocurrency business. 

CrowdWiz, for instance, applied the theory because it best matched its self-governed investment ecosystem. 

After integrating the concept into their business transactions and operations, they can maximize their return on investment, minimize risks, reduce costs, and open countless financing possibilities in the future. 

Another crypto startup, like taking Gnosis, also harnessed the wisdom of the crowd. As a result, investors start to double for the past months. Gnosis already raised approximately $2.5 million. 


Bottom Line 


Since the popularity of the wisdom of the crowd, critics disagree with the concept as they might cause a disaster when not used properly. 

But with the diversity/independence of opinions, aggregation, and decentralization, the theory can guarantee better decisions, avoid potential risks, and open more successful opportunities along the way. 

A collaborative effort from a highly dedicated team can indeed turn your goals into a reality.

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