Are social networks destroying knowledge?

Frankly writing, I had some doubts to include this post on my blog.

I can not give the author the credits he deserves because I could not trace his/her name .

And because I do not share her/his point of view, I is hard to discuss and react.

But is great to read through the considerations.

And as always you can reflect on it and start acting. And that is purpose of this blog!

Source:http://laserlike.com/2009/05/27/are-social-networks-destroying-knowledge

May 27, 2009 Author: unknown

When I lived in New York fifteen years ago, my grandmother and I had brunch together each Sunday.  My grandma picked restaurants the way most New Yorkers make decisions, based on how many people were waiting on line.  The longer the line, the better.  Her reasoning:  who would return to or tell friends about a bad restaurant?

It seemed crazy to me at the time, but it turns out that free-riding on the crowd is often a very effective decision making shortcut — there is wisdom in crowds.  Imagine our ancient ancestors walking the savanna in search of food.  Chasing a large group of hunters who were running after something out of view was probably a better survival strategy than pursuing animal tracks that may or may not have led to food.  Gregory Berns argues that Mankind’s propensity to follow the crowd is at least partially a result of evolutionary biology.

It is so ingrained in human nature now that we will go to ridiculous lengths in order to adjust our beliefs to those of a group.  In the 1950’s Solomon Asch ran a series of conformity experiments. According to Wikipedia:

“In the basic Asch paradigm, the participants — the real subject and the confederates — were all seated in a classroom. They were asked a variety of questions about the lines (which line was longer than the other, which lines were the same length, etc.) The group was told to announce their answers to each question out loud and the confederates always provided their answers before the study participant. The confederates always gave the same answer as each other. They answered a few questions correctly but eventually began providing incorrect responses.

In a control group, with no pressure to conform to an erroneous view, only 1 subject out of 35 ever gave an incorrect answer. However, when surrounded by individuals all voicing an incorrect answer, participants provided incorrect responses on a high proportion of the questions (36.8%). 75% of the participants gave an incorrect answer to at least one question.”

Asch Experiment

Asch Experiment

Crowds are wise when independent, diverse individuals bring their knowledge to the system — they communicate value by selling and buying stocks, impart wisdom by editing a Wikipedia article, or passively match queries with web pages simply by using hypertext links on a blog entry or the like.  The law of large numbers tells us that a larger sample means a better approximation of the truth.  Unfortunately, as David Hirshleifer describes in The Blind Leading the Blind:  Social Influence, Fads, and Informational Cascades, “If there are many individuals, then…with virtual certainty a point in the chain of decisions will be reached where an individual ignores his private information and bases his decision solely upon what he sees his predecessors do.”

Word of mouth and viral marketing work because people have learned that making decisions based on what others are doing is more efficient *and* usually more accurate than relying on private information alone.  The crowd is usually right, so why bother doing the work on your own (index fund, anyone?).  But for the crowd to be wise, participants must bring an independent point of view to bear.  Following the crowd is best strategy for an individual until too many people follow the crowd, and then it’s a terrible strategy.  The irony.

So what do you do?

If you can identify the intrinsic value of something, have the courage to withstand ridicule and bogus but widely accepted “evidence” that you are wrong, and you have a small group of partners to stand by you and take the long view, you can win big and win consistently.  In the Asch experiment above it’s quite clear that the answer is “C.”  Don’t compromise and you will eventually be rewarded.  Of course, this is much easier said than done.  Warren Buffet has mastered this strategy by focusing on the intrinsic value of stocks (fundamental financial statement [and CEO character] analysis), by finding a long-term source of funds in Berkshire Hathaway, and by partnering with Charlie Munger.

Can crowds remain wise in an increasingly socially connected world?

If informational cascades destroy knowledge and Facebook, MySpace, Twitter, and the iPhone are essentially informational cascade services, aren’t we doomed?  How does PageRank survive in a world where more and more URLs are published and re-Tweeted through Twitter?

In day to day life, there are some things that are objective and others that are subjective.  When trying to find a restaurant or bar, most consumers are quite happy to have their social networks influence their decisions.  The number one feature of a bar is who else is there, so informational cascades might actually improve the experience.  And there is signal in social networks — friends are friends because they probably share common interests and values.  Their actions are almost certainly better signals for highly preferential things than the wisdom of a random crowd.  For fashion, games, movies, bars, gyms, salons and a host of other “subjective” things socially driven informational cascades have the potential to improve discovery.

For objective things, informational cascades have the potential to do great harm.  When people discuss their point of view on something before voting with their behavior, conformity will destroy knowledge.  Instead of picking the wrong line as in Asch’s experiment, stock prices get driven too high and then too low or false reports surface like the premature reports of Patrick Swayze’s death.

I wonder if the way people find things bifurcates into solutions for subjective things and solutions for objective things?  Might social networks like Twitter replace Google and Yahoo! on subjective discovery while the current incumbents retain the keepers of the global truth for objective topics?  Will someone use the social graph to sanitize information — that is, use the knowledge of who knows who to de-dupe amplified data and to kill informational cascades?

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