The Psychology of Second Guesses: Implications for the Wisdom of the Inner Crowd
Many important decisions hinge on accurate estimates of uncertain quantities. For example, many policy decisions hinge on forecasts of political events, many managerial decision hinge on estimates of market conditions, and many consumer decisions hinge on forecasts of a product’s durability and long-term cost. Researchers have expended considerable effort trying to identify practical ways to improve quantitative judgments, and the easiest-to-implement prescription harnesses what is known as “the wisdom of the inner crowd.” This research shows that people’s quantitative estimates can be improved simply by having them make two guesses instead of one, and then averaging them. In our research, we show that this wisdom-of-the-inner-crowd effect hinges on whether people consciously consider the direction in which their first guess had erred prior to generating their second guess. In our studies, we manipulated whether we asked participants to explicitly indicate, right before they made their second guess, whether their first guess was too high or too low. We found that asking participants to decide whether their first guess was too high or too low before they made a second guess increased their likelihood of making a more extreme second guess. When the correct answer was not very extreme (as was often the case), this reduced people’s likelihood of making a second guess in the right direction and harmed the benefits of averaging, thus rendering the inner crowd less wise. When the correct answer was very extreme, then asking participants to indicate whether their first guess was too high or too low improved the wisdom of the inner crowd. Our findings suggest that the wisdom-of-the-inner-crowd effect is not inevitable, but rather that it hinges on the process by which people generate their second guesses.