Book Review: The Wisdom of Crowds
by James Surowiecki
Contrary to what you may believe, crowds are wiser than any individual in them. This is the thesis of this book. "Crowds," which may include all sorts of groups from committees to markets, are wise, according to the author, only if they are diverse, independent and decentralized. The Wisdom of Crowds also demonstrates the wisdom of cooperation with strangers - which is why I enjoyed this book so much.
A smart crowd is diverse in background, experience and intellectually. It is smarter than any one individual in it, even if he or she is super-intelligent. According to Surowiecki, even adding members of lesser abilities improves the decision-making of the crowd:
"Adding in a few people who know less, but have different skills, actually improves the group's performance."
The author says the same thing in a different way when speaking of juries, another form of crowd:
"Berkeley political scientist Chandra Nemeth has shown in a host of studies of mock juries that the presence of a minority viewpoint, all by itself, makes a group's decisions more nuanced and its decision-making process more rigorous."
People in a smart crowd are independent, that is, an individual's decision does not depend in any way upon the decision of any other individual in the crowd. You can't find too much independence in a committee or team formed by a boss, a parent, a church or any other group which has an authoritative figure as part of it. The author says such a group is susceptible to groupthink, which is deleterious:
"Deliberation in a groupthink setting has the disturbing effect not of opening people's minds but of closing them."
Groupthink occurs in another form of crowd: the stock market. Why?
"Other people's expectations are constantly impinging on your own. And as investors start mirroring each other, the wisdom of the group as a whole declines."
In addition to being diverse and independent, a smart crowd is decentralized. To make good decisions, you need to avoid hierarchy and centralized control. You want control not to be top-down but bottom-up. The Internet is an excellent example of decentralization. And the author shows how the activities of programmers spread out all over the world contributed to the development of the Linux operating system, which is now competing with Microsoft's Windows. This is a huge example of strangers cooperating with each other to achieve a common goal: an operating system.
The author adds that a man such as Linus Torvalds, who started this worldwide cooperative effort, is needed in order to bring all the ideas together:
"A decentralized system can only produce genuinely intelligent results if there's a means of aggregating the information of everyone in the system."
Linus Torvalds is an excellent aggregator. He gathered the wisdom of the diverse, independent and decentralized crowd. He demonstrated the wisdom of cooperation.
The Wisdom of Crowds is filled with insights, many of them contradicting the common wisdom. It is an unusual book and it will provide you with an unusual read. Read it and gain some wisdom.
