#surowiecki

[philanthropysketchbook]

“In Defense of Philanthrocapitalism” is not much of a defense

In his recent New Yorker piece, James Surowiecki is essentially arguing that because big philanthropy helps target large, sticky problems that government and the private sector are unwilling to pay for, then we ought to be grateful for the Zuckerbergs and the Gates of the world. 

He seems to make the assumptions that “philanthropy” always has good intentions and usually, on balance, has a broad public benefit. 

 Surowiecki notes :

“Philanthropies, by contrast, have far-reaching time horizons and almost no one they have to please.” 

[i.e. no accountability whatsoever. Shudder.] 

And

“This can lead them to pour money into controversial causes, as Zuckerberg has with education reform.” 

[This was a a disastrous $100 million investment. Read Dale Russakoff’s “The Prize”.]

Philanthropy often inflicts harm - whether it’s misguided/ignorant (Zuckerberg’s funding of Newark school reform) or outright intended to undermine democractic processes (donations to super PACs).

If you want to read some really thought provoking work on how philanthropy undermines democracy and civic participation, check out Rob Reich at Stanford.

[thirstygargoyle]

Organizations, on the other hand, clearly can and should have people offer their judgments simultaneously, rather than one after the other. On a deeper level, the success of the Hung and Plott experiment – which effectively forced the people in the group to make themselves independent – underscores the value and the difficulty of autonomy. One key to successful group decisions is getting people to pay much less attention to what everyone else is saying.

James Surowiecki, The Wisdom of Crowds, 65.

[thirstygargoyle]

Assume you have a large group pf people, all of whom have the choice of going to either a new Indian restaurant or a new Thai place. The Indian restaurant is better (in an objective sense) than the Thai place. And each person in the group is going to receive, at some point, a piece of information about which restaurant is better. But the information is imperfect. Sometimes it will be wrong – that is, it will say the Thai place is better when it’s not – and will guide a person in the wrong direction. So to supplement their own information, people will look at what others are doing. (The economists assume that everyone knows that everyone else has a piece of good information too.) The problem starts when people’s decisions are not made all at once but rather in sequence, so that some people go to one of the two restaurants first and then everyone else follows in order. Remember, the information people have is imperfect. So if the first couple of people happen to get bad information, leading them to believe that the Thai restaurant is great, that’s where they’ll go. At that point, in the cascade model, everyone who follows assumes – even if they’re getting information telling them to go to the Indian restaurant – that there’s a good chance, simply because the Thai place is crowded, that it’s better. So everyone ends up making the wrong decision, simply because the initial diners, by chance, got the wrong information. In this case, a cascade is not the result of mindless trend-following, or conformity, or peer pressure. (“Everyone likes that new Britney Spears song, so I will too!”) People fall in line because they believe they’re learning something important from the example of others. […] The fundamental problem with an information cascade is that after a certain point it becomes rational for people to stop paying attention to their own knowledge – their private information – and to start looking instead at the actions of others and imitate them. (If everyone has the same likelihood of making the right choice, and everyone before you has made the same choice, then you should do what everyone else has done.) But once each individual stops relying on his own knowledge, the cascade stops becoming informative. Everyone thinks that people are making decisions based on what they know, when in fact people are making decisions based on what they think the people who came before them knew.

James Surowiecki, The Wisdom of Crowds, 53-55.

[thirstygargoyle]

Even while recognizing (how could they not?) the social nature of existence, economists tend to emphasize people’s autonomy and to downplay the influence of others on our preferences and judgments. Sociologists and social-network theorists, by contrast, describe people as embedded in particular social contexts, and see influence as inescapable. Sociologists generally don’t view this as a problem. They suggest it’s simply the way human life is organized. And it may not be a problem for everyday life. But what I want to argue here is that the more influence a group’s members exert on each other, and the more personal contact they have with each other, the less likely it is that the group’s decisions will be wise ones. The more influence we exert on each other, the more likely it is that we will believe the same things and make the same mistakes. That means it’s possible that we could become individually smarter but collectively dumber.

James Surowiecki, The Wisdom of Crowds, 42.

[thirstygargoyle]

Independence is important to intelligent decision-making for two reasons. First, it keeps the mistakes that people make from becoming correlated. Errors in individual judgment won’t wreck the group’s collective judgment as long as those errors aren’t systematically pointing in the same direction. One of the quickest ways to make people’s judgments systematically biased is to make them dependent on each other for information. Second, independent individuals are more likely to have new information rather than the same old data everyone is already familiar with. The smartest groups, then, are made up of people with diverse perspectives who are able to stay independent of each other. Independence doesn’t imply rationality or impartiality, though. You can be biased and irrational, but as long as you’re independent, you won’t make the group any dumber.

James Surowiecki, The Wisdom of Crowds, 41.

[thirstygargoyle]

The important thing about groupthink is that it works not so much by censoring dissent as by making dissent seem somehow improbable. As the historian Arthur Schlesinger Jr. put it, “Our meetings took place in a curious atmosphere of assumed consensus.” Even if at first no consensus exists – only the appearance of one – the group’s sense of cohesiveness works to turn the appearance into reality, and in doing so helps dissolve whatever doubts members of the group might have. This process obviously works all the more powerfully in situations where the group’s members already share a common mind-set. Because information that might represent a challenge to the conventual wisdom is either excluded or rationalized as obviously mistaken, people come away from discussions with their beliefs reinforced, convinced more than ever that they’re right. Deliberation in a groupthink setting has the disturbing effect not of opening people’s minds but of closing them.

James Surowiecki, The Wisdom of Crowds, 37-38.

[thirstygargoyle]

The positive case for diversity, as we’ve seen, is that it expands a group’s set of possible solutions and allows the group to conceptualize problems in novel ways. The negative case for diversity is that diversity makes it easier for a group to make decisions based on facts, rather than on influence, authority, or group allegiance. Homogenous groups, particularly small ones, are often victims of what the psychologist Irving Janis called “groupthink.” After a detailed study of a series of American foreign-policy fiascos, including the Bay of Pigs invasion and the failure to anticipate Pearl Harbour, Janis argued that when decision makers are too much alike – in worldview and mind-set – they easily fall prey to groupthink. Homogenous groups become cohesive more easily than diverse groups, and as they become more cohesive they also become more dependent on the group, more insulated from outside opinions, and therefore more convinced that the group’s judgement on important issues must be right. These kinds of groups, Janis suggested, share an illusion of invulnerability, a willingness to rationalize away possible counterarguments to the group’s position, and a conviction that dissent is not useful.

James Surowiecki, The Wisdom of Crowds, 36-37.

[thirstygargoyle]

Diversity helps because it actually adds perspectives that would otherwise be absent and because it takes away, or at least weakens, some of the destructive characteristics of group decision making. Fostering diversity is actually more important in small groups and in formal organizations than in the kinds of larger collectives – like markets or electorates – that we’ve already talked about for a simple reason: the sheer size of most markets, coupled with the fact that anyone with money can enter them (you don’t need to be admitted or hired), means that a certain level of diversity is almost guaranteed. Markets, for instance, are usually prima facie diverse because they’re made up of people with different attitudes towards risk, different time horizons, different investing styles, and different information. On teams or in organizations, by contrast, cognitive diversity needs to be actively selected, and it’s important to do so because in small groups it’s easy for a few biased individuals to exert undue influence and skew the group’s collective decision.

James Surowiecki, The Wisdom of Crowds, 29-30.