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The Wisdom of Crowds
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See also: Wisdom of the crowd
| The Wisdom of Crowds | |
|---|---|
 Cover of mass market edition by Anchor | |
| Author | James Surowiecki |
| Country | United States |
| Language | English |
| Genre(s) | Non-fiction |
| Publisher | Doubleday; Anchor |
| Publication date | 2004 |
| Pages | 336 |
| ISBN | 978-0385503860 |
| OCLC Number | 61254310 |
| Dewey Decimal | 303.3/8 22 |
| LC Classification | JC328.2 .S87 2004 |
The opening anecdote relates Francis Galton's surprise that the crowd at a county fair accurately guessed the weight of an ox when their individual guesses were averaged (the average was closer to the ox's true butchered weight than the estimates of most crowd members, and also closer than any of the separate estimates made by cattle experts).[1]
The book relates to diverse collections of independently-deciding individuals, rather than crowd psychology as traditionally understood. Its central thesis, that a diverse collection of independently-deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts, draws many parallels with statistical sampling, but there is little overt discussion of statistics in the book.
Its title is an allusion to Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds, published in 1841.[citation needed]
Contents[hide] |
[edit] Types of crowd wisdom
Surowiecki breaks down the advantages he sees in disorganized decisions into three main types, which he classifies as- Cognition
- Thinking and information Processing
- Market judgment, which he argues can be much faster, more reliable, and less subject to political forces than the deliberations of experts or expert committees.
- Coordination
- Coordination of behavior includes optimizing the utilization of a popular bar and not colliding in moving traffic flows. The book is replete with examples from experimental economics, but this section relies more on naturally occurring experiments such as pedestrians optimizing the pavement flow or the extent of crowding in popular restaurants. He examines how common understanding within a culture allows remarkably accurate judgments about specific reactions of other members of the culture.
- Cooperation
- How groups of people can form networks of trust without a central system controlling their behavior or directly enforcing their compliance. This section is especially pro free market.
[edit] Four elements required to form a wise crowd
Not all crowds (groups) are wise. Consider, for example, mobs or crazed investors in a stock market bubble. According to Surowiecki, these key criteria separate wise crowds from irrational ones:| Criteria | Description |
|---|---|
| Diversity of opinion | Each person should have private information even if it's just an eccentric interpretation of the known facts. |
| Independence | People's opinions aren't determined by the opinions of those around them. |
| Decentralization | People are able to specialize and draw on local knowledge. |
| Aggregation | Some mechanism exists for turning private judgments into a collective decision. |
[edit] Failures of crowd intelligence
Surowiecki studies situations (such as rational bubbles) in which the crowd produces very bad judgment, and argues that in these types of situations their cognition or cooperation failed because (in one way or another) the members of the crowd were too conscious of the opinions of others and began to emulate each other and conform rather than think differently. Although he gives experimental details of crowds collectively swayed by a persuasive speaker, he says that the main reason that groups of people intellectually conform is that the system for making decisions has a systematic flaw.Surowiecki asserts that what happens when the decision making environment is not set up to accept the crowd, is that the benefits of individual judgments and private information are lost and that the crowd can only do as well as its smartest member, rather than perform better (as he shows is otherwise possible). Detailed case histories of such failures include:
| Extreme | Description |
|---|---|
| Homogeneity | Surowiecki stresses the need for diversity within a crowd to ensure enough variance in approach, thought process, and private information. |
| Centralization | The Columbia shuttle disaster, which he blames on a hierarchical NASA management bureaucracy that was totally closed to the wisdom of low-level engineers. |
| Division | The US Intelligence community, the 9/11 Commission Report claims, failed to prevent the 11 September 2001 attacks partly because information held by one subdivision was not accessible by another. Surowiecki's argument is that crowds (of intelligence analysts in this case) work best when they choose for themselves what to work on and what information they need. (He cites the SARS-virus isolation as an example in which the free flow of data enabled laboratories around the world to coordinate research without a central point of control.) The Office of the Director of National Intelligence and the CIA have created a Wikipedia style information sharing network called Intellipedia that will help the free flow of information to prevent such failures again. |
| Imitation | Where choices are visible and made in sequence, an "information cascade"[2] can form in which only the first few decision makers gain anything by contemplating the choices available: once past decisions have become sufficiently informative, it pays for later decision makers to simply copy those around them. This can lead to fragile social outcomes. |
| Emotionality | Emotional factors, such as a feeling of belonging, can lead to peer pressure, herd instinct, and in extreme cases collective hysteria. |
[edit] Connection
Surowiecki presented a session entitled Independent Individuals and Wise Crowds, or Is It Possible to Be Too Connected?[3]He recommends:The question for all of us is, how can you have interaction without information cascades, without losing the independence that’s such a key factor in group intelligence?
- Keep your ties loose.
- Keep yourself exposed to as many diverse sources of information as possible.
- Make groups that range across hierarchies.
Source: http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds
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