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| The Wisdom of Crowds | 
| Author: James Surowiecki
Publisher: Anchor
Category: Book
List Price: $14.95
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Avg. Customer Rating:  157 reviews
Sales Rank: 2090
Media: Paperback
Number Of Items: 1
Pages: 336
Shipping Weight (lbs): 0.6
Dimensions (in): 8 x 5.2 x 0.8
ISBN: 0385721706
Dewey Decimal Number: 303.38
EAN: 9780385721707
ASIN: 0385721706
Publication Date: August 16, 2005
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Product Description
In this fascinating book, New Yorker business columnist James Surowiecki explores a deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant–better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.
With boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, behavioral economics, artificial intelligence, military history, and politics to show how this simple idea offers important lessons for how we live our lives, select our leaders, run our companies, and think about our world.
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The Wisdom of Crowds
I
If, years hence, people remember anything about the TV game show Who Wants to Be a Millionaire?, they will probably remember the contestants' panicked phone calls to friends and relatives. Or they may have a faint memory of that short-lived moment when Regis Philbin became a fashion icon for his willingness to wear a dark blue tie with a dark blue shirt. What people probably won't remember is that every week Who Wants to Be a Millionaire? pitted group intelligence against individual intelligence, and that every week, group intelligence won.
Who Wants to Be a Millionaire? was a simple show in terms of structure: a contestant was asked multiple-choice questions, which got successively more difficult, and if she answered fifteen questions in a row correctly, she walked away with $1 million. The show's gimmick was that if a contestant got stumped by a question, she could pursue three avenues of assistance. First, she could have two of the four multiple-choice answers removed (so she'd have at least a fifty-fifty shot at the right response). Second, she could place a call to a friend or relative, a person whom, before the show, she had singled out as one of the smartest people she knew, and ask him or her for the answer. And third, she could poll the studio audience, which would immediately cast its votes by computer. Everything we think we know about intelligence suggests that the smart individual would offer the most help. And, in fact, the "experts" did okay, offering the right answer--under pressure--almost 65 percent of the time. But they paled in comparison to the audiences. Those random crowds of people with nothing better to do on a weekday afternoon than sit in a TV studio picked the right answer 91 percent of the time.
Now, the results of Who Wants to Be a Millionaire? would never stand up to scientific scrutiny. We don't know how smart the experts were, so we don't know how impressive outperforming them was. And since the experts and the audiences didn't always answer the same questions, it's possible, though not likely, that the audiences were asked easier questions. Even so, it's hard to resist the thought that the success of the Millionaire audience was a modern example of the same phenomenon that Francis Galton caught a glimpse of a century ago.
As it happens, the possibilities of group intelligence, at least when it came to judging questions of fact, were demonstrated by a host of experiments conducted by American sociologists and psychologists between 1920 and the mid-1950s, the heyday of research into group dynamics. Although in general, as we'll see, the bigger the crowd the better, the groups in most of these early
experiments--which for some reason remained relatively unknown outside of academia--were relatively small. Yet they nonetheless performed very well. The Columbia sociologist Hazel Knight kicked things off with a series of studies in the early 1920s, the first of which had the virtue of simplicity. In that study Knight asked the students in her class to estimate the room's temperature, and then took a simple average of the estimates. The group guessed 72.4 degrees, while the actual temperature was 72 degrees. This was not, to be sure, the most auspicious beginning, since classroom temperatures are so stable that it's hard to imagine a class's estimate being too far off base. But in the years that followed, far more convincing evidence emerged, as students and soldiers across America were subjected to a barrage of puzzles, intelligence tests, and word games. The sociologist Kate H. Gordon asked two hundred students to rank items by weight, and found that the group's "estimate" was 94 percent accurate, which was better than all but five of the individual guesses. In another experiment students were asked to look at ten piles of buckshot--each a slightly different size than the
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| Customer Reviews: Read 152 more reviews...
 wisdom of crowds September 7, 2008
As the title suggests, this books attempts to explore the collective intelligence of crowds. It covers a variety of settings, from traffic jams to the stock market performance. The book reminds me of Gladwell's book "The Tipping Point" but feels a bit more cerebral and densely written.
In talking about the wisdom of crowds, Surowiecki recounts a 1958 study that demonstrates the collective wisdom of groups. Students were asked to meet someone in NYC. They didn't know where to meet, and had no way to talk to the other person ahead of time. Yet the majority of students chose the very same meeting place: the information booth at Grand Central station. Not knowing what time they were supposed to meet, just about all of the students said they would show up at the stroke of noon. "In other words, if you dropped two law students at either end of the biggest city in the world and told them to find each other, there was a very good chance they'd end up having lunch together" (p. 91).
All told, a fun read.
Never judge a book by its cover! August 25, 2008
1 out of 1 found this review helpful
I have a confession to make. I started reviewing this book before reading it, based purely on the rather lengthy subtitle `Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations'. First, I planned to make a sneering reference to the dotcom bubble as evidence of this collective wisdom. Then, point to Charles Mackay's classic Extraordinary Popular Delusions and the Madness of Crowds. How sad that this ignorant journalist had pinched the title but absorbed none of the content. Finish with a brief summary of the theory of information cascades, which shows how it can be individually rational to follow the crowd instead of your own opinion.
I thought all this, and suffered terrible embarrassment, if only in the privacy of my own home. For James Surowiecki, of course, covered all these bases and more. The book is not a mindless hymn to the virtues of the marketplace but a nuanced analysis, supported by many historical and contemporary examples, of the conditions under which groups can and can't make better decisions than even the most brilliant individuals.
He argues that there are
"four conditions that characterize wise crowds: diversity of opinion . . . independence . . . decentralization . . . and aggregation"
Unfortunately, the meaning of these terms is not entirely clear. And later in the book the necessary conditions are whittled down to three, aggregation for some reason being left out. Similarly, his classification of cognition, coordination and cooperation problems is not well explained. Since the entire first half of the book is based on these distinctions, it can be a little hard to follow. The second half, which applies these concepts to real world problems like traffic jams, peer reviewed science, committees, company organization, markets, and democratic government, is much better.
So much for the form of the book. Fortunately, the content is excellent. The pages are crammed with humorous and illuminating tales. My own favorite: In the wake of the Challenger disaster, the stock of the four major contractors involved with the shuttle program all lost value. By the end of the day, Thiokol (who built the solid fuel boosters) was down 12%, the other three only 3%. The next day, the New York Times reported two rumors unconnected with Thiokol and declared there were "no clues". Six months later the Presidential Commission revealed its findings: the O-ring seals on the boosters were responsible. There was no evidence of any insider trading.
If this story does not take your fancy, there are dozens of others to choose from (many from more systematic if less memorable studies). Failures of rationality are given space along with successes: stock bubbles, intelligence failures, the Columbia disaster. Some of the conclusions are commonplace to economists and possibly surprising to those who are not: seemingly "wasteful" competition can be a valuable discovery procedure, central planning fails because those who have the information lack the power and incentive to act on it, fund managers tend to underperform market indexes, prediction markets (which were so strongly rejected when proposed for terrorism) are the way of the future. And some may be shocking to economists and commonplace to everyone else: sometimes the collective good is served by individually irrational decisions, such as voting or paying taxes.
Like Freakonomics, The Wisdom of Crowds is based on a wealth of informative and amusing material that is partly spoiled by its presentation. Unlike Freakonomics, it is a book which is unashamedly devoted to one central theme. As such, the sheer abundance of information is sometimes a distraction. It also lacks an index, which can be a considerable nuisance. A little pruning, combined with clear and consistent terminology and organisation, would have lifted this book into the five-star category.
Originally published in the Economic Record, September 2006.
 Excellent Primer August 24, 2008
1 out of 1 found this review helpful
There's a reason why democracy is the crappiest form of government, except all others (to paraphrase somebody famous).
The theme of this book is that groups of people are smarter than individual people. It's sort of counterintuitive to the American spirit of individualism, but James Surowiecki does a creditable job of providing a good case to support his thesis in a very readable format. Anyone who regularly works in problem-solving groups will immediately recognize the fundamental truth of the author's message.
It contains excellent (and entertaining) historical examples that should provide plenty of food-for-thought for any student of government, economics or history. Which means, in a perfect world, it should provide something of interest for just about any participant in any collaborative, collective or power-sharing structure (ie, any effective organization, and a double-dose for every ineffective organization).
My only problem with this volume (and it's not really a problem) is that Surowiecki didn't go far enough. He could have productively doubled the size of this book, and given many more prescriptive formulas for effective group participation and leadership. It would provide a great counter-weight to a number of existing works that seem to suggest the same thing (but are far more tedious). A good updating would be helpful as well (considering the plethora of abundant, and more recent, examples of the disasters of individual [or 'siloed'] decision-making).
In its current form, the book is a great primer on the subject; in an expanded format it could be enormously powerful. His basic thesis, however, could not be more relevant. I strongly recommend it.
Groups of People are Smart! August 13, 2008
1 out of 1 found this review helpful
This author has done an outstanding job of proving his thesis that groups of people are smarter than the smartest person in the group. The book touches on markets, juries, and economics, and many more topics, furthering his main point. This book will persuade the reader that experts and loners do not make the best decisions, but groups of informed people do.
The Wisdom of The Wisdom of Crowds August 2, 2008
1 out of 1 found this review helpful
This fascinating book it based on a simple, but counterintuitive premise--that a crowd of diverse people will almost always be smarter than any single expert. That is, take a group of people, some who may be educated, some who may be experts, and some who may be completely misinformed, and let them each independently solve a problem. Then, if you can take the average solution, it will be close to correct. Moreover, it will be closer than almost everyone else in the group. It's basically a bell-curve of knowledge, in which the exact center point would be the best guess.
Surowieki gives numerous examples, from betting markets, stock markets, psychological experiments, game theory, nature, artificial intelligence, economics and business. Two of the cases that really stand out to me are the search for a missing submarine, the Scorpion, in 1968, and the stock market's reaction to the Challenger disaster in 1986. In the case of the Scorpion, an enterprising naval officer named John Craven assembled a diverse team of men with a wide range of knowledge and had each guess, without consulting with one another, where the sub was. He then averaged their guesses. The sub was found 220 feet from that location. Similarly, after the Challenger crash, the stocks of most companies involved in the space program predictably took a quick nosedive. Most also quickly recovered, with the exception of Thiokol, the company that produced the O-rings on the rocket boosters. The stock market seemed to say that Thiokol was responsible, though all news at that point was that the cause was unknown. It wasn't until six months later, when the Presidential Commission released a report that the stock market was proven correct. It had been the O-rings.
Surowieki discusses different types of group decisions and how the theory applies to each. He also covers the many dangers that often befall groups making decisions leading to things like groupthink and stock market bubbles.
The Wisdom of Crowds is a radical theory, one that runs counter to much of what we believe in a democratic society and an economy based on the hierarchical org chart--namely in the power of the individual, the knowledge of our experts, and the wisdom of our leaders. Its implications for the way we manage our companies and our government is enormous. But after reading this book, it's hard to doubt its wisdom.
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