Hardcover | 297 pp. | Doubleday | 25/05/2004 | 1st Edition
Why the Many are Smarter than the Few. It’s this subtitle (appeared to the last edition of the cover) that has attracted me to this book by James Surowiecki. He makes the case that large groups of people are smarter than an elite few, no matter how brilliant the individuals are. Crowds are better at solving problems, innovating, coming to wise decisions, and predicting the future. The title The Wisdom of Crowds pays homage to Charles Mackay’s 1841 book, Extraordinary Popular Delusions and the Madness of Crowds, yet challenging its premise.
By focusing on a lot of social research, and giving tons of anecdotal pieces of evidence, the author breaks a lot of assumptions that we have on how groups reason, and how they can effectively reach better results than individuals. But don’t take everything for granted: Groups are not more efficient always.
To function properly, “collective intelligence” must satisfy four conditions. This the core of The Wisdom of Crowds.
- Diversity: Individuals have “private knowledge” and insights that stem from their varying levels of knowledge, personal experience and ways of thinking about the world. No one person should expect to be able to replicate that alone. Any single individual will often be unjustifiably overconfident and unable to properly calibrate his own judgment (an important aspect also analysed in another reviewed book).
- Independence: Protecting independence of thought is vital to creating wisdom. Thus, the views of individuals in a diverse group are best gathered separately (outside a group session) before being aggregated. Using this method allows mistakes and errors in judgment to cancel out and prevents both herding and information cascading.
- Decentralization: People closest to the problem are the most likely to have the specialization and tacit knowledge required to solve the issue. Decentralized decision making to those closest to the problem and most accountable for the results will generally produce the wisest solutions. However, decentralization can also trap knowledge that would benefit the larger entity inside a single unit, and that should be avoided.
- Coordination: People are inherently good at coordinating themselves and producing nearly optimal solutions despite an absence of communication. This deals with the reasoning of groups, in addition to the reasoning of individuals.
- Aggregation: The best ideas of a diverse and independent group are useless in the absence of a proper aggregation method. Without proper aggregation, the information produced by crowds is nothing more than noise. Many times that aggregation is as simple as counting up the number of private guesses on the number of jelly beans in a jar and dividing them by the number of individual guesses to get their aggregated guess. In other cases, more sophisticated methods of aggregation, like Bayesian search theory, may be required
If a group of people making a decision is large enough, their errors should cancel out. Information and error are the properties of each individual decision or judgment, so once the errors are cancelled out, you are left with information. That information can then be aggregated and thus produce a collective decision. This collective decision, if these criteria are satisfied should be correct or at least approximately correct.
The Wisdom of Crowds also goes into depth on analyzing when crowds do get it wrong. In an era of fake news, this was an anticipation of recent trends and shows that also large crowds can be manipulated, by focusing on breaking one or more of the 5 elements above (usually it’s sufficient to stop information sharing). Entire Part II of the book is focused on all the cases when groups don’t work (think about committees for example, and how these rarely produce positive results…).
Yet, the above exceptions don’t affect the validity of the overall case the author makes. Interesting to see the link with the “avegarianism” concept we have seen, as well as the more recent book by Malcolm Gladwell Talking to Strangers. How can we relate that concept with this?
The Wisdom of Crowds enables diverse groups to solve the complex problems of cognition, coordination, and collaboration. From space flight to corporate boardrooms to tipping at restaurants, group psychology permeates culture across many dimensions of our life. Learning to harness this wisdom of the crowd could prove to be a pivotal decision for a business; failing to recognize the emergence of harmful group behaviour could be its downfall.
And you? What do you think of this book?