With the rise of social media and the increasing interconnectivity of the world a new kind of labor has been created. This type of labor draws upon the intellects and abilities of all people, instead of only employing the powers of a prescribed labor force. In 2006, Jeff Howe finally gave a name to this labor form, when he coined the term “crowdsourcing” (Howe). To date, crowdsourcing has opened up an entirely new dimension of labor and innovative possibilities. It may be the start of a new era of labor infrastructure with social media as the primary venue through which it occurs. Thus, it is important to understand what crowdsourcing is and evaluate its potential functions in business.

What is crowdsourcing really? Defining it requires further reference to Jeff Howe, the creator of the term. As defined by Howe, crowdsourcing is “the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call.” He further explains, that while “this can take the form of peer-production (when the job is performed collaboratively)” it is also “often undertaken by sole individuals” (Howe). The “open call” aspect of crowdsourcing ensures that there is no discrimination of who can participate in the labor. This is important because it ensures that the “employers” receive responses from only those who are interested in completing the task, which are often those who are the most capable of doing so. People are naturally drawn to working in things they are good at; things that come easy to them. Therefore, the open call ensures that for any given project those “hired” for the work are those who will produce the best end result. But how does this really work? Is there a means of guaranteeing that only the best laborers will be the ones who answer the call? The truth is, it doesn’t always work perfectly in a business setting. This is often because the businesses implement crowdsourcing incorrectly or try to use it for the wrong functions. What are the “right” functions to use crowdsourcing for and how is it implemented correctly?

In order to understand the functions of crowdsourcing, it is necessary to first examine why a business would choose this form of labor. This can be best illustrated by understanding how crowdsourcing may be a superior form of human capital compared to traditional employment systems. Looking at businesses that have utilized  crowdsourcing successfully will elaborate this point more clearly.

Wikipedia(74514)Credit: The best example of successful crowdsourcing may be the mass aggregation of information on Wikipedia’s business model not only employs crowdsourced labor, but also depends on it in order to maintain the high standards of the site’s content. This quality is created out of a melding of ideas (since anyone can edit it) which come together to form an explanation that is complete and objective. This allows for the website’s thoroughness to be not only in its content, but also its associative form. For example, clicking on the first link of any Wikipedia page repeatedly will always lead back to the page for philosophy. This is logical from a fundamental standpoint considering how the world understands and defines philosophy. But how did Wikipedia manage to create this seemingly flawless system? To understand the business model of, it is necessary to turn to a discussion of the power of crowdsourcing as a way to provide the most quality labor power.

James Surowieki, the founder of Wikipedia, wrote The Wisdom of Crowds to explain the merits of creating a crowdsourced encyclopedia. He begins with a summary of the findings of a British scientist named Francis Galton who in 1906 found that collective crowds of ranging intelligence levels could produce answers that far exceed those of individuals. In the story, he describes the experiments of Galton who in his attempt to prove that people are generally stupid actually proved the opposite after conducting a statistical study of a weight-judging competition. The competition asked a crowd of eight hundred people to guess the weight of an ox. This crowd included farmers and butchers, but was primarily was made up of people who had no background or understanding of cattle or their weights. No one guessed correctly. Galton then collected and studied the guesses of the people who participated in the contest and found that the average of all of their estimations was only one pound off from the correct weight of the ox. Thus showing that the crowd’s collective intelligence, even with a range of intellects, was more accurate than individuals with vast knowledge on the subject (i – iv, Surowieki).

Crowdsourcing IdeasCredit: significance of this story is enormous. If crowds, or “collective intelligences,” are more accurate than individuals it would be logical to say that crowdsourcing is a more valuable form of labor than the employment of individuals in specific jobs. Unemployment is currently at its highest point since the 1980’s and, according to the Department of Numbers, many of these unemployed laborers are among those with the least education; 25%+ have no college education and 13.2% have less than a high school education (“Unemployment Demographics | Department of Numbers”). Those unemployed individuals may be more valuable in crowdsourced labor than in traditional employment positions because many do not have the education to work in professional or even vocational occupations. Redirecting the productive power of these individuals to crowdsourcing may be an efficient way to utilize the labor surplus that the United States is currently experiencing.

However, it’s not as simple as aiming a bunch of people at a project and watching it go. In his book, Surowieki also describes the four necessary conditions of the crowd to be “sourced” in order to create quality production. First, the crowd must have diversity of opinion, which means each person has their “private information” even if it’s just an “eccentric interpretation of the known facts.” Second, the individuals of the crowd must have independence, which means “people’s opinions aren’t determined by the opinions of others.” Third, the crowd must be decentralized, which means that “people are able to specialize and draw on local knowledge.” Fourth, the crowd must be able to be aggregated, which means it has “some mechanism for turning private judgments into a collective decision” (10, Surowieki). Breaking down each of these elements will help clarify why these four things are essential to creating a “wise crowd.”  

DiversityCredit: at the concept of diversity, it’s clear that in order to produce the most objective information there must also be a sense of controversy. There are multiple solutions to any given problem, but without diversity groups tend to get stuck on one-track frames of thought. Diversity of opinion is essential in order to create an unbiased and logical solution. It is because of this that Surowieki later identifies homogeneity as a contributor to the occurrence of “crowd intelligence failures” (“The Wisdom of Crowds”).

Independence is the next element of wise crowds because it ensures that the group won’t be as prone to jumping on one idea without thinking it through. People are naturally susceptible sway by the majority rule so maintaining independence is a smart way to allow each person within a group to have an equal share of input. Without independence imitation can occur and often results in the form of an “information cascade,” in which choices are made in continuous sequence without allowing much room for anyone to disagree with the initial decision. One additional problem that can occur is emotionality, which includes inter-crowd influences like peer pressure or herd instinct (acting together without a planned decision). Emotions, while useful in some situations, are not always prudent in group-decision making because they can blind individuals from seeing the logical action if it is distorted by negative sentiment (“The Wisdom of Crowds”).

The decentralization of crowds is what allows them to “divide and conquer.” Without this element, centralization can occur, which can lead to the establishment of a hierarchy within the group. This hierarchy simply dictates opinions from the superiors down instead of allowing those who specialize in a given area to provide information. When making decisions, especially those that affect the long-term plan, it is crucial to look at every possible outcome. Therefore, it is logical that decentralization is a necessary element to creating a wise crowd because it allows for every member of the group to utilize their individual strengths; in a large enough group this can mean that the strength of one individual will cancel out the weakness of another (“The Wisdom of Crowds”).

Lastly, when evaluating the element of aggregation, it is necessary to first reiterate why crowds can create better solutions. The aggregation of all information, whether it be intelligent or erroneous, must be included in the final “average” of the group’s opinions. So while it’s important to keep Innovation(74516)Credit: and diversity of opinion, there must be some means of combining all of it together without creating ambiguity. Division, Surowieki points out, is detrimental to a crowd’s final conclusions because it allows for some members to withhold information that would otherwise influence the end decision. Every member of a crowd, whether an expert or a novice, must be given a voice that contributes to the end result. Otherwise, the absence of even one opinion could significantly alter how the crowd's “average” is developed (“The Wisdom of Crowds”).

Concluding the discussion of the four elements, it's possible to translate this to a business perspective, specifically by addressing the functions of crowdsourcing. understand how crowdsourcing functions in business. Since the possibilities are truly endless these functions will be explained as generalizations. To begin, it may be best to discuss the functions of crowdsourcing that are already successfully being used by businesses, specifically through social media and online interactions. categorizes the crowdsourcing into four types of common business operations. These four categorizations are: crowdsourcing design,  “crowdfunding,”  “microtasks,” and open innovation. Each of these practices can be explained in terms of what the “employer” of the work must do and how crowds respond to these requests (Bratvold).

Crowdsourced design is perhaps the most widely used form of crowdsourcing to date. In the context of this discussion, design will refer to any type of work that requires creative thought or imagination. In order to be effective, the employer must clearly explain what he needs, what it will be used for, and any other details which may include compensation (if any) and deadline for completion (Bratvold). Crowdsourcing in this capacity will either result in the submission of ideas by many individuals or submission of a few ideas by collaborative efforts—meaning the crowd works on the problem together through some sort of group-editing process. The former provides the employer with a range of products to choose from, though they were created without mass collaboration, and the latter provides a few products that are more “well-rounded;” this fits into Surowieki’s criterion.

The second major use of crowdsourcing is for fundraising or “crowdfunding.” These types of projects are typically orchestrated by artists, non-profits, and CrowdfundingCredit:, and require that the employer first define the details of the project that the money will go towards. Additionally, it is necessary to provide information regarding the goal amount of money to be raised, the deadline, and if possible some sort of incentive for contributors (Bratvold). This is a widely established function that is used by politicians, but looking back to Jeff Howe’s definition of crowdsourcing, it may not exemplify the nature of crowdfunding very well, since it is so strictly regulated.

Moving forward, the third primary function of crowdsourcing is for “microtasks,” which are small tasks that only require a modest amount of effort to complete. Microtasking requires the employer to first break up a large project into small tasks and then send the work to a “crowd” of different individuals. For example, a website administrator may request that all 3,000 pictures in his/her site be tagged with titles and descriptions. Each picture would take only a moment to complete individually so splitting this work up among 100 people would significantly reduce the effort each has to put in. Since the work is so minimal, compensation is typically somewhere between $0.01 - $0.10 per completed task (Bratvold). This function is a useful way of outsourcing the “grunt work” that corporations usually delegate to the lowest employees. Leveraging the labor of crowds can save business’s time and effort for more important work.

Forum(74520)Credit: final function to discuss is “open innovation,” which is the creation of a kind of forum of thoughts revolving around a single idea or problem. This works by having the employer post an idea or problem onto an open forum (usually a website) and then observe the input that is received (Bratvold). In an online forum this can be done in real time and allows the employer to answer questions regarding the background of the concept and provide his own feedback to any input as it is received.

Open Innovation is perhaps the best examle of creating the “wise crowd” that Surowieki advocates. If used in the context of a problem or decision, open innovation is exactly the type of function he proposed crowdsourcing be used for, namely, decision analytics. Additionally, Surowieki identifies forecasting or predictive models to be a choice area of utilization for crowdsourcing. He points to multiple historical cases in which crowds were able to draw highly accurate decisions out of problems with uncertain conditions (“The Wisdom of Crowds”). Since forecasting can be a difficult task for businesses, crowdsourcing may be a cost-effective and powerful solution. In fact, some companies are already employing this on a mass scale through social media monitoring. By understanding the sentiment of the public towards a particular idea of brand, the company can more easily determine the best course of action given their estimations of public response to each one.

Crowdsource MindsCredit: the power of digital connectivity it seems that crowdsourcing has found its footing in the business world. The infinite potential that crowdsourcing can provide serves to emphasize its many benefits to businesses (and by extension the economy). Imagine how the world might change if crowdsourcing became viable on a universal scale? The allocation of labor would no longer be as difficult or necessary, the unemployed or those who physically can’t work could find usefulness within society, and its practice would promote a universal level of social trust and communication. If we are ever to accomplish these things, it is essential to remember the elements that Surowieki described and to understand that while there is no perfect formula for enacting a crowdsourced project, there are certainly some base necessities for making this work within a free market. What are these necessities? How can crowdsourcing be utilized on a larger scale within a capitalist economy? The answer to these questions will only come in time, as the world continues to adapt to the changing technology as an established medium for crowdsourcing to take place.

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