Can the “Wisdom of Crowds” Calm Economic Fears?

This morning, President Obama’s top economic advisor, Lawrence Summers talked about the “excess of fear” among Americans about the economy.  Summers, the director of the National Economic Council, went on to say that "fear begets fear” and that "is the paradox at the heart of the financial crisis.”  I find this particularly interesting as I see crowds turn into mobs with fear eating away at our lives. 

My wife said other day that it seems like the whole world is depressed right now.  Her observation was based on the fact that large media is focused negatively on economic turmoil.  I realize that we are not in a growth period and that things are not great economically. At the same time, I cannot help but wonder if Mr. Summers has a point - that we as a community are pursuing a self-fulfilling prophecy.

Several years ago, I was on the 6:30AM commuter flight from San Jose to LAX on my way to see a customer.  Immediately after take off, the pilot came on the loud speaker and explained that we had a collision with a large bird.  The pilot said that although he did not see anything wrong with any of the cockpit instruments, it was better to be safe than sorry.  He told us that we were returning to the airport to check it out.  Being that this was the first flight in the morning, most people were still half asleep and calm.  About 5 minutes into our journey back to the airport, a woman two seats in front of me started to make an odd yelping sound.  When the flight attendant went to check on this woman’s well being, the woman yelled out that she did not want to die.  The flight attendant told her that this was a routine procedure but the woman did not hear a word she said.  As the woman was sobbing, all she could say was “my sister died on an airplane and I do not want to die”.

At this point, everyone became a bit uneasy and the chatter among the other passengers got noticeably louder and more excited.  I have to admit that I suddenly felt a bit uneasy as well.  As it turned out, we got back to the airport safely and there was nothing wrong with the airplane whatsoever.  At this point, I was done with flying for the day and I called the customer to say I was not coming.

The point of this story is that one person changed the whole temperament of the crowd in mere seconds.  Mr. Summers insists that "what we need today is more optimism and more confidence."  I wonder what the result would be if we could take the “wisdom of the crowd” within the entire country on the feeling of the economy.  I know that certain places like Detroit and the financial districts of San Francisco and New York would not be very upbeat, but what about other places in the country?  The key with the wisdom of crowds is to capture the opinions of a large diverse group and give everyone in that group the same vote weighting.  Unfortunately, large media lets negativity have a much larger vote than positivity and hence they are analogous to that woman on my flight while US citizens are the passengers.

Again, I am not saying that things are rosy, but I do look forward to the day when we can truly take the wisdom of the crowd on topics like the economy.  By doing so, we might be able to fulfill Mr. Summer’s plea for optimism and confidence.

The Crowd is gathering…………

(Thanks again to my editor Julia who makes me look smart!!)