Scott E. Page, Leonid Hurwicz Collegiate Professor of Complex Systems, Political Science, and Economics at the University of Michigan, recently visited the Yahoo Labs campus in Santa Clara to give a talk entitled, “The Potential and Limits of the Crowd.” Page began by explaining that, more and more, intelligent individuals are being outperformed by larger groups. He illustrated his point with the fact that the last Nobel Prize in physics was awarded to 42 people as opposed to one person as has usually been the case historically. Today, he believes the Internet is unleashing the wisdom of crowds -- that we are increasingly harnessing the power of the Internet to solve problems through what Page refers to as "crowd-sourcing." One example of successful crowd-sourcing is the company Threadless – a t-shirt design company that encourages people to submit their designs online. The designs are then put to a public vote, and a number of winning designs are selected, printed on tees, and sold through the company’s online store. Creators of the winning designs receive prizes. DARPA(Defense Advanced Research Projects Agency) held a “Red Balloon Challenge” that was created to test the way social networking and lesser-known Web-based techniques can help accomplish a large-scale, time-critical task. They randomly placed floating red balloons throughout the country and challenged people to find them. They awarded $2,000 to people who found the balloons, $1,000 to people who found the people who found the balloons, and $500 to people who found the people who found the people who found the red balloons. Innocentive, an Eli Lilly research company, posts problems on their Web site and challenges users to submit solutions. Winners receive a cash prize of $10,000. One of the challenges – how do you get fluoride into a toothpaste tube without getting powder everywhere – was solved by an electric guitarist who knew that positively charged fluoride particles would be attracted to the tube without any significant dispersion. This is an example of harnessing the power of the Internet to solve problems. In this case, Page also pointed out that regardless of background, problems can be solved when you source crowds because of diversity. Diverse, smart crowds can predict – the phenomenon of “the many of whom can be combined.” Diverse groups of intelligent people who have different perspectives, mindsets and ways of solving problems can make more accurate predictions and solve problems more effectively than even groups of experts. He also noted that the cost of crowd-sourcing is “ridiculous” – the Threadless model amounts to $13 per design; the red balloon challenge cost $10 per team (involving PhDs and other reputed experts), and Innocentive pays about $42 per seeker. Page concluded his talk with a beer analogy: “are we tapping into what’s out there?” How do we effectively tap into a crowd’s collective wisdom? More importantly, rather than tap, Page points out that we must brew or train people so that we can blend together and be more productive collectively. Watch the entire talk here: