The Future of the Crowd

Our group met Tuesday night in the UGLI to discuss the final section of Crowdsourcing: Where We Are Going.

Chapter 10: The Age of the Digital Native

Using statistics, Jeff Howe emphasizes the prominence of youth connected to technology. He also discusses the ability to use youth as creative resources, primarily in the world of gaming.

The gaming industry has come to rely on user creations and feedback. Due to the availability of software and information online to help any gamer develop his or her own mods, what used to be a "hackers only" type of community has spread to the general population, increasing the amount of user developed content in other online communities.

Society has grown from socializing in settings outside the home (e.g. libraries, school gymnasiums) and to socializing indoors through an internet connection. The culture that the web has cultivated grants teenagers a creative outlet, no matter how dreadful it may be, to share with others online. Using online information and various methods of acquiring expensive programs, the younger generations has learned to harness the technology of scripting languages, animation utilities, and photo/video editing programs. The internet is also allowing students to collaborate on homework by editing wiki pages for submission.

--> Notable Statistics:

• 200 American million kids have Internet access, pg. 261
• Over 50% of American teenagers (with Internet access) create web content such as photos, artwork, blogs and music remixes, pg. 270
• $400-500 million spent annually by Americans on "tech camps," pg. 166
• 33% of American teenagers contribute to the websites of others vs. 13% of adults, pg. 272

Takeaway message: "The erosion of the boundary between producer and consumer has begun to exercise a considerable effect on our economy and our culture." pg. 269

Chapter 11: The Rules of Crowdsourcing

1. Pick the right model: collective intelligence, crowd creation, crowd voting, crowdfunding.
2. Pick the right crowd: think demographics! Closely linked with rule #1. The internet provides a medium to gather significant crowd participation.
3. Offer the right incentives. $ is not always necessary, people often will contribute for other gains (notoriety, resume, confidence).
4. Keep the pink slips in the drawer. Not everything can and should be crowdsourced - it is not always an easy way out. Crowdsourcing requires advertisement, sorting of submissions, and selection on a grand scale.
5. The dumbness of crowds or the benevolent dictator Principle: The crowd needs guidance by well-meaning individuals; self-rule will not always work.
6. Keep it simple, Break it Down. Divide and conquer - allow people to demonstrate their specialized knowledge.
7. Remember Sturgeon's Law: 90% of everything is crap. Real talent is hard to find.
8. Remember the 10%, the antidote to Sturgeon's Law. The crowd can effectively identify the 10% with talent.
9. The community is always right. Cater to the user's needs and then develop an economic model around them.
10. Ask not what the crowd can do for you, but what you can do for the crowd.

In short, if you scratch the crowd's back, they will scratch yours.

What Can The Crowd Do?

Chapter VII What the crowd creates:

• When done correctly, businesses using crowdsourcing (like istockphoto) can undercut their competitors at a mere fraction of the cost, while harboring a growing and enthusiastic community of people who share the same passions.These communities can provide the rewards of mentorship and making friends through similar interests rather than a shared workspace - which usually cannot be achieved at 'jobs'.
• Those truly gifted with talents (such as good photographers) will always find jobs. Meanwhile, those declaring themselves as professionals now must compete with the crowd for the same assignments.
• For a successful business to have a crowd and a community surrounding it, there needs to be a meaningful exchange of goods and experiences, or else the crowd will vanish.

An example of failure to recognize the limits of the crowd is the business model of current.com

• The website designers overestimated the crowd's willingness to invest in video equipment and editing software to upload their own videos of citizens reporting the news.
  
• The designers also underestimated the amount of interest that the crowd had in actually reporting the news and taping serious types of videos. (see youtube.com and search cats for proof by contraposition)
  

Tips on getting the crowd to work with you:

• You need to draw them in by engaging them in part of the action. "Just because they show up once doesn't mean they'll show up over and over."
  
• You need to accommodate a range of commitment levels when putting crowdsourcing to work. (newassignment.net e.g. counting cars, recording price of groceries and comparing them)

Chapter VIII What the Crowd Thinks:

• The crowd is its own best filter (American Idol, Youtube Ratings, sort by popularity/downloads)
• 1:10:89 rule - for every 100 people on a given site, 1 will create something, 10 will vote on that creation, and 89 will consume the creation.
• Amazon and eBay use rating systems and recommender systems to help sell stuff better
• The crowd is large enough so that work can be split up such that users can contribute a minimal effort and complete tasks (like tagging photos on flickr)
• Corollary: The crowd as a source of work means they tasks are infinitely* scalable yet still very responsive.
• Note: The Great Digg Riot of 2007 and HD-DVD encryption key and the issue of trying to censor the crowd does not end well, sort of
  

*a turn of phrase

Also, Andrew Keen points out that the cult of the amateur will make us collectively dumber:
"we're diving headlong into an age of mass mediocrity in which the mob replaces experts and we all become collectively dumber." Additionally, Howe adds "Google, YouTube and Digg all constitute a form of mob rule, and as their importance increases, so does the mob's influence. But there is a fine line between mobocracy and democracy, and some tolerance of the former is generally required to achieve the latter."

Section II: Chapter Nine "Crowd funding"

Chapter Nine discusses how the idea of crowdsourcing has transferred into the area of finance, where individuals pool their money together known as crowd funding, social banking, and micro-financing or micro-lending.

What Crowd Funding Does:

• Those who are in need of money or a loan are directly connected to a donor. For example, one micro-finance charity, Kiva allows donors to pay for the amount a poverty-stricken business owner in Africa to fund their business. The majority of these micro loans are around $250, but this allows the individual to usually cut out the middle man who charges an extoritionate amount.


• Creates a direct link to the giver and reciever, which is more successful than other aid, because it gives the exact amount the individual needs that they can only spend on their business.


• This connection creates more interaction between both parties involved which increases satisfaction and results on both sides. The recipients of the loan also feel more personally responsible and are more likely to payback the loan in full.

Examples of Crowd Funding:

• Kiva/Grameen Bank: Two similar ideas that use direct links between the donor and recipeint to help boost business in poverty stricken areas. Instead of donors, the Grameen Bank uses other local business owners that pool in their money to finance loans to those in need. Both create a local bridge between the money, which puts more personal responsibility that the individual uses the loan properly, and pays it back promptly.


• Sellaband: Allows artists to post profile sites in hopes of finding investors who will donate money in hopes of recieving more rewards if the band becomes famous. The money the band recieves goes towards traveling fees, instruments, or venue fees, but the more investors they have, the more likely the band will be able to afford to go places they weren't able to before and increase the chances of becoming successful. This cuts out the middleman of production costs and record labels, allowing the band and the investors to earn more. These investors are much more personally involved and help promote PR of the band by telling family and friends to listen to the band.

Benefits of Crowd Funding:

• "It shifts the organization of an exsisting field" by giving more power to the consumers. pg. 217


• Shifts heirachery to horizontal, where individuals are directly connected to those needing the money.


• Those the receive loans are more likely to pay back loan and even give loans to others, as seen in Kiva where many gave back to the program once they were financially stable.


• This is better than aid as it helps boost the local economy and teach proper techniques to managing business. In the Kiva program, 68% of loan recipients were able to get out of poverty which is much higher than any other aid program.

Thus, the success of crowd sourcing in the area of finance can transform the idea of lending and provide assistance to more of those in need than ever.

Diversity and Collaboration

Week Overview: Our group met on March 23, 2010 at 10:00pm in the Michigan League. We discussed the outlines of the chapters we read and plans for our future reading schedule.

This blog post covers Section II: Where We Are (Chapters 5 and 6) of Crowdsourcing. See the following posts for a review of the other chapters in Section II.

Diversity Trumps Ability Theorem:

• Scott E. Page. With an interest in computer programming and behavioral economics, Scott E. Page - a modern Francis Gaulton - simulated the economic actions of a collection of highly intelligent agents and a separate collection composed agents with mixed levels of intelligence. In several repeated trials, the diverse collection of agents outperformed the expected geniuses dubbed "Mensa agents." (This surprise inspired him to write a book: The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies). pg. 132
• MATLAB. In 1999, Ned Gulley proposed and implemented a computer programming competition that generated fast-paced results. As each programmer submitted a solution entry, it was judged and posted to a website. At that point, other programmers were free to use any of the previously submitted code - many choose to slightly modify code, the bulk of which was written by someone else. Since 1999, the competition has been hosted twice a year each year. "On average, Gulley notes, the best algorithm at the end of the contest period exceeds the best algorithm from day one by a magnitude of one thousand." Frequently, it is the unexpected contributors (amateurs) that provide the greatest innovation and improvements to code. pg. 138
• The Wisdom of Crowds by James Surowiecki. Jeff Howe references The Wisdom of Crowds and shares the Who Wants to be a Millionaire example. pg. 142

Harnessing collective intelligence:

1. Prediction markets --> primary ex(s):

• Iowa Electronic Market. The IEM is explained as in The Wisdom of Crowds, but to a lesser extent. pg. 161
• Policy Analysis Market. Robert Hanson, a firm believer in prediction markets, designed PAM to allow participants to bet on questions of political policies (e.g. likelihood of events in foreign affairs, direction of GDP, level of national security). One component of PAM was also a terrorism index, which gained the attention of the Terrorism Information Awareness Office. This ultimately brought about the end of PAM though its function and potential were comparable to the IEM. pg. 164

2. Crowdcasting networks --> primary ex(s):

• InnoCentive. Jeff Howe draws examples from InnoCentive throughout his work. The following story of Ed Melcarek is worth highlighting. As of 2007, Melcarek had solved 7 of InnoCentive's challenges - a commendable accomplishment. Though he earned his master's degree in physics, all of the InnoCentive challenges he has won, he selected from other categories (e.g. chemistry and biology). Each win has brought him financial support and moreover, confidence. Yet again, the unexperienced crowd member has outsmarted the challenge participants competing in their specialization. Another note - A Ph.D candidate, Karim Lakhani looked into the challenge-solution process of InnoCentive and discovered that "75% of the solvers already knew the solution to the problem." Therefore, finding the best solution is often a task of finding the right person - the solutions already exist outside the scope of internal R&D teams. pg. 150
• Netflix. In 2006, Netflix challenged the world to create an algorithm that could improve its recommendation system by 10%. Submissions were scored and their leaders were placed on a leaderboard, but their code was not displayed. However, many leaders decided to share their code without Netflix facilitation - each hoping to interact with other competitors and learn from the process. pg. 155
• Marketocracy. Ken Kam and Mark Taguchi made Marketocracy (a website) to identify savvy stock traders. Anyone could make an account and would then be given $1 million dollars in Monopoly money to invest. Though the designers planned to use it to locate the best investors, they found it could also be used to locate the best stocks. Meanwhile, investors (new and old) could test new portfolio collections without the risk of real financial failure. Marketocracy proved to be a powerful prediction market, but the algorithms behind it have been modified and seem to still be changing as downfalls are discovered. pg. 169

3. "Idea jams" --> primary ex:

• Dell IdeaStorm. Dell created IdeaStorm as a channel of innovative ideas from consumer to the company. Anyone can submit an idea and anyone can review ideas with thumbs-up or thumbs-down markers. Dell tracks the best ideas based on consumer opinions and implements them in their development (e.g. computers with pre-installed Linux OS). pg. 158

Group Meeting Week One

The group met at the Ugli to discuss Section 1: How We Got Here of Crowdsourcing by Jeff Howe. This section mainly focuses on the creation of crowdsourcing outlets and introduces the idea of ProAm (the professional amateur). This section begins with the history behind crowdsourcing and then details several examples of its success.

The History of Crowdsourcing:

• During the mid 19th century, the overeducation of the middle class led to dissatisfaction with their highly specialized careers which led to their desire to exercise other skills during leisure hours. pg. 29, 33 and 39
  
• What begins as a hobby quickly can turn into a fulfilling passion where the most rewarding work is created.
• For example, the website iStock allows anyone to post and sell their photography where only 4% actually "claim photographer as their main occupation." pg. 27
• Throughout the years, many internet sites have incorporated community aspects to generate new ideas and feedback, which increases productivity and consumer satisfaction
  

Examples of Crowdsourcing:

• Threadless.com: artists can create their own t-shirt designs where other community members vote for their favorite designs. They use incentive-based marketing where members receive credit for referring friends that later become customers, and winning designers receive up to $2,000, but more importantly acknowledgment from their peers.
  
• Linux: An open-source software developed by thousands of contributors both amateurs and professionals alike. Contributors disseminated the work to suit their own expertise. As more contributors submit their work, the reputability of Linux grows.
  
• InnoCentive/ Proctor & Gamble: Used out-of-house research for product development and opened communication between departments. Researchers sought solutions for Proctor & Gamble, not only to receive compensation, but to build their resume and to solve a meaningful challenge outside the workplace. The creation of Innocentive has helped triple P&G's net profit to $10 billion.
  
• We Are the Strange: Mike Belmont, an amateur filmmaker created a fan base through Youtube without the help of movie producers and eventually premiering a movie at the 2007 Sundance Festival. By showing clips on Youtube, he was able to receive feedback and perfect his videos the liking of the audience. This marked an important change in movie production with no middle-man, cutting cost and allowing fans to become more personally invested in the movie.
  
• eBird: An internet site where anyone can post bird sightings. Because of the large data submissions, are able to identify the pattern of flights that would not be able tracked with just professionals. This provides professionals more time to interpret the data.
  

Benefits of Crowdsourcing:

• Eliminates production costs
• Promotes globalization
  
• Expediates development
  
• Adds to a culture's intellectual capital
• Reduces work duplication
• Increases production efficiency
  
• Provides a space for creativity outside corporate structures
• No limit to potential ideas or contributors