Yahoo!, O’Reilly Hope to Harness “Wisdom of Crowds” (Live from E-Tech, Part 2)

The notion that crowds possess a collective intelligence not available to individuals is hot these days, thanks in part to books like James Surowiecki’s The Wisdom of Crowds. At the O’Reilly E-Tech conference in San Diego this morning, O’Reilly’s Rael Dornfest and Gary William Flake of Yahoo! Research Labs announced a collaboration that draws on this concept in an effort to predict technology trends. Their joint project, the Tech Buzz Game, went online today. It gives tech-heads with a gambling bent another place to try out their forecasting skills, and their aggregate opinion about coming (and going) trends could eventually translate into intelligence that companies and the media can translate into action, Dornfest and Flake said.

For more than a year, the Technology Review Innovation Futures section of TR’s own website has allowed users to buy and trade options on specific propositions, such as “Google’s IPO will occur on or before May 1, 2004.” The concept behind the Tech Buzz Game is similar, but all of the markets are pegged to the same type of outcome: the volume of queries using specific keywords from Yahoo’s millions of users.

For example, if a player of the Tech Buzz Game believes that interest in the iPod Shuffle will grow over the coming months relative to rival technologies, he or she can buy stock for the iPod Shuffle in its particular market (which might also include other brand-name portable music players). Yahoo! calculates a weekly “buzz score for each stock within a market, based on the volume of search queries related to those stocks over the previous seven days. This buzz score determines the value of a stock; if the iPod shuffle has a score of 60 meaning 60 percent of all searches in that market use “iPod shuffle as the keywords then the owners’ stock is worth $60 per share (it’s all fake money, as with TR’s Innovation Futures). Players can make money by selling stock at a higer price than their purchase price; also, at periodic intervals, markets are “cashed out and the full value of all shares is returned to users. The three richest players in the Tech Buzz Game as of June 29, 2005 will win an iMac Mini, a 20-Gigabyte iPod, and an iPod Shuffle, respectively.

“This is a new way to tap the collective wisdom of the Web, says Flake. For now, Yahoo! and O’Reilly’s main interest in the project is more intellectual than commercial, he and Dornfest said. “It’s a research project to test whether you can predict [technology] trends, says Dornfest. The key to the experiment’s success, of course, will be to attract enough users to gather meaningful predictions. But “by launching it here at E-Tech,” Dornfest says, “we hope to have a built-in audience of connectors who will bring other people in.”