The Wisdom of Crowds

James Surowiecki’s The Wisdom of Crowds turned the way I view the world completely on its head.  Concise, well thought out, and sharply written the premise behind The Wisdom of Crowds is this:

Under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.  Groups do not need to be dominated by exceptionally intelligent people in order to be smart.  Even if most of the people within a group are not especially well-informed or rational, it can still reach a collectively wise decision.

Obvious?  No.  This is a contradiction to the way many of us think of crowds.  Most of us, myself included before I read the book, might consider an individual person quite clever but would never describe a crowd as “wise”.  No doubt this is because we typically equate crowds with mobs.  And (as Surowiecki himself emphasises early on in the piece) a mob, of course, is profoundly stupid.  However stop to consider situations where crowds prove to be very astute decision makers.  A classic example of this is horse race betting.  It is no accident that the shorter-odd horses consistently finish so well.  Rather, a group of people is making a collective decision on an uncertain outcome that, time and time again, turns out to be remarkably accurate.

Which leads me to the critical conditions underlying Surowiecki’s hypothesis.  For a crowd to be “wise” it must be under the right circumstances.  In order for a group of people to come to a collectively good decision, it must:

  1. Be diverse. That is, a wide range of backgrounds is essential, including experts and non-experts.
  2. Have a basic grasp of the process and outcome. You wouldn’t necessarily ask a group of non-doctors to make a decision on a surgical procedure.  Not the same way you would on the outcome of a horse race at least.
  3. Act independently. That is, individuals in the group must be allowed to use their own internal judgement systems to come to a personal decision, without influence from each other and “outside”.
  4. Aggregate-able. There must be some way of crystalising the crowd’s collective “decision”.  In the horse racing example the aggregating system is via odds calculation.  The horse with the shortest odds is the group’s pick of the winner.
  5. Produce a result. For example, a race will be run and when it’s over there will be a definitive winner.  The stock market, on the other hand, isn’t as suitable as it’s in perpetual motion.

In essence Surowiecki details where group decision making can work, when it can work best, but also how it can fail.  Based on a simple but counter-intuitive theory that seems obvious by the end, it presents a compelling argument.  You don’t need a degree in statistics to enter.  The Wisdom of Crowds is aimed squarely at the non-technical audience and it hits that target.  Included is plenty of supporting evidence and examples in the form of entertaining anecdotes highlighted to press home its case.  It’s a great read, a real page-turner, and I highly recommend it.  If you’re looking for gift ideas this Christmas then The Wisdom of the Crowds would be an excellent addition to the wish list.


“Meet me by the tram stop.  I’ll be the one wearing a hat.”


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