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Wisdom of the Crowds

September 29, 2015 by
Filed under: General, Risk Management

Recently I saw a great documentary named “The Code” on BBC television. Amongst other things, the presenter at one point put 4,510 jelly beans into a large glass jar and asked people to guess how many jelly beans are there in the jar. 160 people guessed any number between 800 and 40,000 or so, but nobody was really near the actual number. Now, the interesting part was when he calculated the average of all 160 guesses. Surprisingly (or not, when you're familiar with the concept) the average was 4,515, which was very close to the actual number. No one individual knew, but together they knew, hence the term "wisdom of the crowds".
The term comes from the book The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, published in 2004, by James Surowiecki.

Now what can we learn from this in risk management? Perhaps more than you can think of. Wouldn't it be appropriate to say that we need to conduct a risk assessment not for 5 people, but for 500, because collectively they know better? It is important that people do not influence one another, and make their own judgment. But in general, I believe there is a lot to say for this. Perhaps a thought for your next risk assessment.

Tags: BWise, Risk, Risk Management, Enteprise Risk Management

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