In 2004 James Surowiecki, a business columnist with The
New Yorker, published the well-received The
Wisdom of Crowds, which explored (and celebrated)
the phenomenon of "collective intelligence," whereby
the consensus forecast of a number of lay people was
almost invariably superior to the individual forecasts
of experts and guru’s in the field.
With Oscar season freshly behind us, we have just had
another annual chance to see
this phenomenon at work thanks
to Michael Mauboussin, a strategist at Legg Mason and since
1993 an adjunct professor at Columbia Business School. Each
year he asks his students to name the Academy Award winners
in 12 categories, including some rather obscure such as
best film editing. And this year, as every year,
the consensus was more accurate than any single individual, correctly selecting 9 of the 12 actual winners—even
though his business students are anything but Hollywood
insiders. By contrast, the average individual’s success rate? Only
4.1 of the 12.
So: All very interesting, but a big so what, right?
I actually believe there’s something quite tangible, and potent, here. "Collective
intelligence" has succeeded at everything from predicting
the location of a sunken Navy sub (to within a few hundred
yards) to forecasting when particular products would actually
be launched (internally at Google).
There’s even a
company that sells software enabling you
to easiliy set up "prediction markets," and
their clients include Abbott Labs, Corning, Lilly, Siemens,
and Dentsu (Japan’s largest ad agency). As
the company, NewsFutures, says:
"Here’s how it works: You define the outcomes
for which you would like reliable estimates. Then you invite
people with relevant knowledge to trade “virtual” stock
based on their confidence in each outcome. The result is
a trading price that tracks the consensus opinion. Because
the market is online, it involves any number of participants,
from anywhere, at any time."
What could a law firm do with this?
Try, for example, asking all your attorneys—even
include, for the wildest and craziest among you, your
clients—things like:
- which practice areas should we
invest more in, and which less? - do we have an office in a city with poor prospects,
or lack an office in a city with outstanding prospects? - which competitor do we need to worry about the most
vis-a-vis (say) our M&A practice? - who’s going to win the contested election for managing
partner? (Ooops—did I say that?)
The point is simply this: The assembled expertise
of your executive committee or practice group heads may
not be—indeed, if you buy the notion of "collective
intelligence," almost surely will not be—your
most valuable resource for insight about the future.
This exists; it’s for real; it’s available now. What
have you got to lose?
