The Wisdom of Crowds

by James Surowiecki
ISBN: 0385721706

If you think of yourself as smarter than the average bear, the main idea in Surowiecki’s book may seem counterintuitive: groups of people are smarter than individuals — even when the individual is an expert.

Of course, groups can include very smart, even expert, individuals. Not just any group will do — it needs to be a diverse crowd, independent, with access to different sources of information — and the crowd isn’t always right. But a group will, more often than not, make the best decision.

Surowiecki realizes this idea can seem quite wrong, so he spends a fair amount of time considering counterarguments to his claim. He dissects the perils of groupthink, explains why money managers stay employed even though most of them don’t beat the market (“It’s much safer for a manager to follow the strategy that seems rational rather than the strategy that is rational”), and points out that decentralization of intelligence went awry not in breaking down a monolithic culture but in not aggregating information.

He fully acknowledges that crowds are not always right — only that they are more often right than individuals. Making mistakes can be important. Smart groups don’t always need to be right to function well:

What makes a system successful is its ability to recognize losers and kill them quickly. Or, rather, what makes a system successful is its ability to generate lots of losers and then to recognize them as such and kill them off. Sometimes the messiest approach is wisest.

Moving from an intitial premise that might seem difficult to accept — chasing the expert is a waste of time, collecting a diverse group of thinkers will lead to better results — Surowiecki reaches a conclusion that is easier to embrace. He tells us that society will know more if information is spread, not horded and controlled. Recognizing the wisdom of crowds should bring us to “trust individual leaders less and ourselves more.”

Recommended reading, particularly if you have an interest economics for real people, want a larger framework for thinking about collective/collaborative information-based systems, or have an interest in decision making that isn’t top-down, command and control oriented.

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