Crowdfunding: Crowd Wisdom, Mob Mentality

Photo courtesy jamescridland on FlickrThe concept of “crowd wisdom” is often cited as a strength of crowdsourcing and crowdfunding.

The wisdom of the crowd is the process of taking into account the collective opinion of a group of individuals rather than a single expert to answer a question. A large group’s aggregated answers to questions involving quantity estimation, general world knowledge, and spatial reasoning has generally been found to be as good as, and often better than, the answer given by any of the individuals within the group.Wikipedia

However, some of the uglier aspects of the crowd often come into play as well. In fact, the two often happen in concert. As more individuals become aware of crowdfunding and get involved in the process it will be interesting to see how the two sides of the crowd manifest themselves. Three examples follow.


Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an incorrect or deviant decision-making outcome.Wikipedia

A clear example of this would be the rush to judgement in declaring Susan Wilson a millionaire based on some loosely-understood facts about her background and employment situation. She has since admitted to being well-off enough to pay the $850 she requested in her Kickstarter campaign, but she has also denied being “a millionaire.”


Bandwagoning is a more specific version of groupthink. In short, the probability of any one person adopting a belief increases as other members of the crowd also adopt said belief. This constitutes a problem

Consider the misreporting during the Boston Marathon investigation by large journalistic entities like CNN, FOX News and the New York Post. Once one of these outlets reports a falsity as fact, that falsehood tends to spread. The same thing plays out in the crowd as well.

Dunning-Kruger Effect

The Dunning–Kruger effect is a cognitive bias in which unskilled individuals suffer from illusory superiority, mistakenly rating their ability much higher than average. This bias is attributed to a metacognitive inability of the unskilled to recognize their mistakes.Wikipedia

This can be summed up as “ignorance begets confidence.” It is a psychological phenomenon that leads to unskilled people feeling confident in situations where expertise would be desired or warranted.

This effect can play out in the crowd as well as among project creators. I’d argue the Hanfree case was a classic case of this effect in that project creator Seth Quest was not familiar with the difficulties of manufacturing and distributing a product like the Hanfree. He was initially empowered by the crowd’s reaction and his own success on Kickstarter, but was later defeated by his own inexperience and inability to connect the dots.

In short, all the crowd does is not necessarily wisdom. That isn’t to say that the crowd doesn’t accomplish amazing things. Crowdsourcing efforts have been pivotal in everything from changing the way we work to identifying and apprehending criminals. However, things can go wrong with the crowd, too.

Does the crowd have or need an ombudsman? What recourse do project creators have when the crowd perpetuates falsehoods regarding those campaigns or the creator itself? When investment crowdfunding becomes legal and the stakes are higher, what will the reaction be if the crowd begins engaging in defamatory rhetoric based on false facts?

Time will tell.

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