What If Your Executive Committee's Not So Smart?

In 2004 James Surowiecki, a business columnist with The New Yorker, published the well-received The Wisdom of Crowds, which explored (and celebrated) the phenomenon of "collective intelligence," whereby the consensus forecast of a number of lay people was almost invariably superior to the individual forecasts of experts and guru's in the field. 

With Oscar season freshly behind us, we have just had another annual chance to see this phenomenon at work thanks to Michael Mauboussin, a strategist at Legg Mason and since 1993 an adjunct professor at Columbia Business School.  Each year he asks his students to name the Academy Award winners in 12 categories, including some rather obscure such as best film editing.  And this year, as every year, the consensus was more accurate than any single individual, correctly selecting 9 of the 12 actual winners—even though his business students are anything but Hollywood insiders.  By contrast, the average individual's success rate?  Only 4.1 of the 12.

So: All very interesting, but a big so what, right?

I actually believe there's something quite tangible, and potent, here.  "Collective intelligence" has succeeded at everything from predicting the location of a sunken Navy sub (to within a few hundred yards) to forecasting when particular products would actually be launched (internally at Google).

There's even a company that sells software enabling you to easiliy set up "prediction markets," and their clients include Abbott Labs, Corning, Lilly, Siemens, and Dentsu (Japan's largest ad agency).  As the company, NewsFutures, says:

"Here's how it works: You define the outcomes for which you would like reliable estimates. Then you invite people with relevant knowledge to trade "virtual" stock based on their confidence in each outcome. The result is a trading price that tracks the consensus opinion. Because the market is online, it involves any number of participants, from anywhere, at any time."

What could a law firm do with this?

Try, for example, asking all your attorneys—even include, for the wildest and craziest among you, your clients—things like:

• which practice areas should we invest more in, and which less?
• do we have an office in a city with poor prospects, or lack an office in a city with outstanding prospects?
• which competitor do we need to worry about the most vis-a-vis (say) our M&A practice?
• who's going to win the contested election for managing partner? (Ooops—did I say that?)

The point is simply this:  The assembled expertise of your executive committee or practice group heads may not be—indeed, if you buy the notion of "collective intelligence," almost surely will not be—your most valuable resource for insight about the future.  

This exists; it's for real; it's available now.  What have you got to lose?