The Wisdom Of Crowds

In this week’s Business Surgery, Paul Hague offers an interesting slant on the quantity vs. quality debate.

An article caught my eye in the Financial Times recently (24th July 2012). It was by John Kay and called The Parable Of The Ox. It told the story of how, in 1906, the great statistician Francis Galton observed a competition to guess the weight of an ox at a country fair. Eight hundred people entered. Galton, being the kind of man he was, ran statistical tests on the numbers. He discovered that the average guess (1,197lb) was extremely close to the actual weight (1,198lb) of the ox. This story was told by James Surowiecki, in his entertaining book The Wisdom of Crowds.

This got me thinking. We all know that 1 million people can’t be wrong – or can they? It seems that in general they seldom are wrong. In the latest copy of the International Journal Of Market Research (volume 54, issue 4, 2012), Martin Boon of ICM Research wrote a paper called Predicting Elections in which he reported on the accuracy of response to a question which asked people what they thought would be the percentage share of the vote given to each party in the forthcoming general election. This was not a question about which way the respondents themselves would vote but a “wisdom of the crowd question” about how they thought others would vote. Without any prompting from the interviewer, a spontaneous prediction was extremely close to the actual result (within 2.2%). Just as people got the weight of the ox right, they correctly predicted the outcome of the general election.

Election result (%) ICM final prediction (%) “Wisdom of the crowds” spontaneous prediction (%)
Labour 29.6 28 34
Conservative 36.8 36 36
Liberal Democrat 23.8 26 21
Others 9.8 10 9
Average error 1.2 2.2

So what does this mean for us in business to business research? It should mean that if we ask informed people what they think is the size of a market or what they believe to be suppliers’ market shares or something of that ilk, we ought to get a fair prediction of actuality. I suppose the emphasis must not be on the word wisdom but on the word “crowds”. In the parable of the ox story and in the ICM survey there were many hundreds of respondents. We need to ask enough people to be able to get a fair prediction. And this may be the problem in business to business markets – often there aren’t many people who have this sort of knowledge. Maybe in business to business markets what matters is not relying on the views of lots of people who have no idea but finding just one person who is in the know.

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