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Wisdom vs. Madness of Crowds
Why is it that sometimes mad crowds do incredibly stupid things, even destroy whole countries, while smart crowds achieve seemingly impossible feats and attain the highest levels of humanism, wealth, and culture?
After decades of experimentation and practical work with a specific collective intelligence mechanism, prediction markets, I think I can offer a few answers for those interested in a better world.
We must learn to harness the power of Collective Intelligence and prevent the periodic resurgence of short-sighted Collective Ignorance if we want to escape the never ending cycle of progress and destruction.
I will start from the simple idea that - in truth - it is always forecasts which drive human action. It is a big fallacy that "facts make it clear what we should do". Frequent repetition does not make it true: facts are absolutely meaningless without a theory through which we interpret them. Only a theory allows us to look into the future and chose the best present course of action.
It follows that we must learn a new way to go about important decisions:
(1) We must make our predictions explicit and objectively verifiable.
(2) We must consciously identify the reasons which drive our predictions.
(3) We must diligently verify our predictions based on real outcomes.
These rules are even more important for collective forecasts which drive decisions in companies, organisations, or entire countries. I predict that a society following the simple recipe above will be more ethical, wealthy and happy, immunised against the evils of today's political reality: consensus instead of polarisation, realism instead of wishful thinking, participation instead of individual powerlessness.
Here is what I know and recommend, at this stage.
Overview
Next: A poll without polling
About the author:
Hubertus Hofkirchner is Founder, CEO & Chief Futurist of Prediki Prediction Markets, the universal prediction platform. Philosophically aligned with the Austrian School of Economics, he is also a co-organiser of the monthly "Austrian Meetup" salon at the Hayek Institute in Vienna and a co-founder of Vienna-based Institute for Predictive Studies.
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