While our culture generally trusts experts and distrusts the wisdom of the masses, New Yorker business columnist Surowiecki argues that “under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.” To support this almost counterintuitive proposition, Surowiecki explores problems involving cognition (we’re all trying to identify a correct answer), coordination (we need to synchronize our individual activities with others) and cooperation (we have to act together despite our self-interest). His rubric, then, covers a range of problems, including driving in traffic, competing on TV game shows, maximizing stock market performance, voting for political candidates, navigating busy sidewalks, tracking SARS and designing Internet search engines like Google. If four basic conditions are met, a crowd’s “collective intelligence” will produce better outcomes than a small group of experts, Surowiecki says, even if members of the crowd don’t know all the facts or choose, individually, to act irrationally. “Wise crowds” need (1) diversity of opinion; (2) independence of members from one another; (3) decentralization; and (4) a good method for aggregating opinions. The diversity brings in different information; independence keeps people from being swayed by a single opinion leader; people’s errors balance each other out; and including all opinions guarantees that the results are “smarter” than if a single expert had been in charge. Surowiecki’s style is pleasantly informal, a tactical disguise for what might otherwise be rather dense material. He offers a great introduction to applied behavioral economics and game theory.
(via Amazon)
Fast Company calls it an ‘idea-driven narrative’. This genre, made famous by Malcolm Gladwell, takes a simple (but important) idea and uses research, case studies, and personal experiences to enable the reader to see the world from a new perspective. Wisdom of Crowds, by James Surowiecki, is a notable addition to this enriching genre.
The simple idea upon which Surowiecki builds is that, under certain conditions, groups of people make better decisions than any individual could hope to make. There are three conditions: the group must be diverse; the individuals should make their decisions independently; and the people must be decentralised, thus ensuring that decisions are based on local knowledge.
This book is essentially about the theme of complexity, and how group decision-making provides a way of tackling uncertain situations and solving apparently intractable problems. Three types of problems are examined, each with its own chapter:
1.cognitive problems: which have verifiable answers (such as calculating the weight of a bull after it has been slaughtered and dressed);
2. coordination problems: in which people coordinate their behaviour, knowing that others are behaving similarly (such as buyers and sellers finding each other and trading goods at a fair price);
3. cooperation problems: which involve getting people to work together for a common good (such as paying taxes or reducing pollution), over and above their individual interests.
(via Anecdote)
