Facebook’s Bet: “Wisdom of Friends” Will Beat Out “Wisdom of Crowds”

We talk a lot here at MIT Sloan about the “wisdom of crowds” (see, for instance, MIT SMR’s interview with Thomas Malone, “A Billion Brains Are Better Than One”).

But there may be times when you or I would prefer, say, 14 personally-chosen brains over a billion random ones. At least that’s what Facebook is betting on.

“A Woman’s Place,” a profile of Facebook chief operating officer Sheryl Sandberg in the July 11 issue of The New Yorker, explains how Facebook is exploring this idea:

Chris Cox, the engineer who oversees Facebook’s product development, says of television, “You go home at night and there’s nine hundred and ninety-nine channels. . . . The real problem in that world is: What should I watch?” Perhaps you could read TV Guide, perhaps you could type “best Thursday sitcom” into Google, or perhaps you could scan some newspaper reviews. Cox wants you to be able to see on your screen what your Facebook friends are watching. “You should turn it on and it should say, ‘Fourteen of your friends liked “Entourage” this week. Click to watch.’ ” The idea is for Facebook to “tune in to everything around you,” he said. “We call it social design.”

To put it another way, Facebook is trying to come up with an approach to organizing the Internet that’s entirely different from what Google has done. Google’s answer to “best Thursday sitcom” has long been determined by algorithms that analyze billions of Web pages—the so-called wisdom of crowds. Facebook will try to guide you through the preferences of your friends.

Also in the story, written by Ken Auletta, this tidbit: “People often wonder if Facebook will go public soon. It’s projected that it will generate pre-tax profits of about a billion dollars this year. An I.P.O. now, analysts say, would be worth eighty to a hundred billion dollars. Although there was a flurry of stories in mid-June, reporting that Sandberg had been meeting with investment bankers in preparation for taking Facebook public, two senior executives at the company flatly deny this. . . . Sandberg does, however, acknowledge that investors and employees want to make a profit, and that an I.P.O. is inevitable. “We will go public at some point,” she says. At the end of this year, Facebook is expected to have five hundred shareholders, which will trigger S.E.C. regulations that require a company to disclose its finances to the public. It is likely that the company will go public soon after that, in the first six months of next year.”