The Wisdom of Crowds

Surowiecki takes some excellent science, basic and interesting findings on behavior and cooperation, and wires them into one of the most ridiculous ordering of facts and arguments to ever pass as quasi-science.

The basic structure of the book is:

1. Interesting result proving crowds are awesome and experts are nearly meaningless
2. Note about all the factors that could make this finding meaningless
3. Conclusion which assumes away often relevant issues

Aside from weak arguments, he goes so far as to include statements like... while independence is necessary, we find coordination can change the outcome, sometimes for better and sometimes for worse. In the end, he ends up with a mess of statements which not only contradict his thesis but contradict themselves.

Perhaps insight into his underlying political motivations (aside from his work with The New Yorker) are best shown by a quote on p115:

"Yet Grasso was being paid as much as many Wall Street CEOs, who are themselves heftily overcompensated."

Whether you agree with him or not ends up irrelevant. The point is... how better to write a book which undermines the salaries paid to experts and upper management then to assert that they're largely useless. Further, if this is your goal, why bother citing much hard evidence (a complaint on other reviews as well). Indeed it seems like the only reason he notes counter-arguments is to make it seem like he has considered and dismissed them, which could hardly be possible given the strength of many of these arguments.

This book earns a second star only, as another review properly noted, as an accessible discussion of the power of large groups and simple behaviors. But please, read this for pleasure not substance!

For those of you who have read the book:

Maybe we should take all the contradictory arguments in the book and average them to figure out what he really means!

This is an interesting study - really, a collection of anecdotes - about how aggregations of diverse and independent individuals sometimes (how often?) come to better decisions than even the smartest individuals among them. But it is deeply flawed by the author's implicit definition of "rationality" as wealth maximization. Throughout the book, he claims that individuals defy the economists' assumption of rationality.

No economist adopts such a narrow, impoverished, and obviously false definition of "rationality," according to which we could easily prove that no individual in the world, from Mother Teresa to the richest person in the world, is rational. (Richard Posner defines rationality as wealth maximization, but he's not an economist.) People seek to fulfill many many preferences that have nothing to do with wealth. This does not make them "irrational" in any economic or non-economic sense. Individuals satisfy the economic requirement of rationality so long as their preferences (at any given time) are transitive (if they say they prefer wearing long pants to shorts, they don't wear shorts when they have the option of wearing long pants). Their rationality may well be "bounded" by various cognitive and information constraints; they may use heuristic devices to make decisions, instead of acting as human calculators of costs and benefits. But none of that makes individuals "irrational." Indeed, given bounded rationality, reliance on heuristic devices is decidedly rational from an economic (transaction-cost-saving) point of view.

The author's constant mis-application of the concept of economic rationality throughout the book is (very) annoying, but it does not negate his larger thesis. To the contrary, his thesis would be even stronger if the author recognized that groups can be smarter than the smartest individual among them, even though all everyone in the group is behaving in accordance with economic definitions of rationality.

The Wisdom of Crowds is nothing more than collection of statistical truisms which Surowiecki attempts to explain as some sort of mystical force at work. If you have even the slightest background in statistics, you will find each of his examples of "group intelligence" frustrating and perhaps insulting.

He is right - Any poll for which there is a right anwer, a random group of individuals does seem likely to choose the correct answer by popular vote. This is true even when, individually most of the individuals get it wrong. But is this evidence that groups are smarter than individuals?

To highlight the flawed logic found this book, I'll provide an example in terms of a magic trick:

Suppose I have a deck of cards and place the four aces face down on a table. I then ask a group of 100 people to tell me, by popular vote, which card is the ace of spades. Lets say beforehand, I told just 10 of the people which card was correct and the other 90 guessed at random. Without a doubt, the group would pick the right card almot every time even though 90 percent of the group had no idea. The author would have you believe that this is some sort of mystical group intelligence, or that humans are wired to be smarter in groups.

Unfortunately, there is a much simpler answer: probability. The 10 people who knew the right answer skew the vote making it probable that the group will guess correctly. As I increase the number of people who know the right cardr, the group has a better and better chance of getting it right. This doesnt mean groups are smarter than individuals. In fact, it suggests that a relatively small number of knowledgable people can control the direction of much larger groups.

Read this book now.

Along with "the company of strangers" you will be equipped for the twenty-first century if you grock this book well.

He's wrong about bubbles though - the wise majority there are those who use the infrastructure after the idiots have payed for it.

That's how we will get into space - watch for Branson to dilute his risk then stand clear.

I wasn't successfully involved with two skateboarding bubbles without understanding that fundamental.

Bubbles are a tax on greedy "rentier" idiots. The infrastructure floats free after a collapse - free of capital debt ans free of its innapropriately employed inventors. Think "Iridium" Think "Dubai in the Sky"

May The Froth be With You.

Read this book now.

Along with "the company of strangers" you will be equipped for the twenty-first century if you grock this book well.

He's wrong about bubbles though - the wise majority there are those who use the infrastructure after the idiots have payed for it.

That's how we will get into space - watch for Branson to dilute his risk then stand clear.

I wasn't successfully involved with two skateboarding bubbles without understanding that fundamental.

Bubbles are a tax on greedy "rentier" idiots. The infrastructure floats free after a collapse - free of capital debt ans free of its innapropriately employed inventors. Think "Iridium" Think "Dubai in the Sky"

May The Froth be With You.

The wisdom of crowds is an excellent book to understand the people and their reactions. It begins with a simple experience. It reminds me of the first lesson in game theory. It was not the same experiment but it has the same setting. A non informed crowd must guess the weight of an ox. The result was very surprising. It had a very close guess of the real weight. That’s what it is all about. If the group is divers, independent and decentralised than it is possible for a large group to come around with the right decision. No expert and no so called better informed people can make a better decision. The first part deals with the wisdom of the crowds and he gives many examples of it. It deals with a lot of real examples especially the electronic poll markets, the Challenger disaster and the reaction of the stock market, sports and the principle of Google. He explains the three important conditions for the wisdom of the crowds. Than he goes to the coordination of decision making and applies it to more general themes like tax paying and traffic jams. He uses the results from experimental economics. In the last century are more studies on behaviour published than on rational thinking. These studies help to explain the basic ideas of the new economic man and the reasoning of the social behaviour of the people. It is independent over cultures but it varies in intensity.
The book is very easy to follow. There are so many real life examples that you have quick access to the book. It is very helpful for coordination problems and cooperation games. It gives you a new insight in decision making and organisation.

My review is for the Audiobook format, read by accomplished actor Erik Singer who really brings the text alive with his skillful reading. Though this might appear at first glance to be a complex, socio-economic theory heavily based on statistical analysis, the author's many real-life examples enliven the concepts and make them easy to understand.

We are all familiar with examples of "group think" where individuals in a group become convinced (or convince each other), that they have arrived at the "right" conclusion. The fatal tragedy of the Space Shuttle Columbia that burned up on re-entry is a prime example. The flight management team convinced themselves that the debris that came loose and damaged the skin couldn't possibly have any dangerous consequences. Groups that spend a lot of time together develop a cohesiveness and desire for harmony and consensus that squelches valuable debate and discards dissenting views.

The author posits that 3 conditions must exist in order to create an "intelligent" group: diversity, independence, and decentralization.

Examples and anecdotes range from the ability of a group to guess the correct weight of an oxen or the number of jelly beans in a jar, to voting for candidates, to picking stocks in the stock market, to determining strategy for a company.

The book is entertaining, enlightening and well written, though I'm leery of accepting anecdotes and examples as proof of such a far-reaching theory. History abounds with examples where groups and crowds did not make wise decisions - the wrong candidate elected to office, genocide, riots, corporate failures, bankruptcies, etc.

But the concept does have some merit, and will definitely come to mind the next time I'm in a meeting where the boss in insisting that everyone achieve consensus....

I will start by saying the "wisdom of crowds" has its limitations - it is entirely possible for a large group of people to be wrong. However, the author covers a wide variety of situations where the collective wisdom of a large group can be surprisingly accurate. In addition, he expands on several key concepts of particular importance to classes I teach.

When you want to make a good decision / prediction but do not have enough data to use a rigorous, scientific methodology, one alternative is aggregate the "best guesses" of a diverse group of people. The idea of the diverse group is that any biases in one person might be offset by another person. However, in order for this principle to work there are 3 criteria that must be met...
1) the group needs true diversity (different educational backgrounds, life experience, etc.)
2) the group needs different sources of raw information (can't have everyone reading the same trade journal to form their opinions)
3) the group needs the freedom to express their views even if they conflict with the views of those higher on the org chart.

When these criteria are met, the collective wisdom of the "crowd" will usually be much more accurate than the result you would get if one or more of the criteria are violated.

This book is not only a fascinating collection of interesting observations which is well written and easy to read, it is an important book that contains truths about the world that everyone should understand.

The central idea is clear: people in a group, if polled in the right way, almost always show more intelligence, and make better decisions, than individuals. Especially if the crowd show no particular aptitude in the subject being polled, the crowd can out perform individual experts almost every time. Sound crazy? It would be if there was not so much evidence to support this non-intuitive stance. That is the important thing: it is non-intuitive. We *believe* that individual experts should do better than they do.

He starts the book with a series of anecdotes where crowds have guessed remarkably well: The 1906 guessing the weight of an ox, the 1968 search for the submarine "Scorpion", studies of audience responses in "Who Wants to Be a Millionaire?" He also covers some failures to poll the crowd: the Challenger disaster. These struck me as cherry picking anecdotes, but where things get really interesting is the Iowa Electronic Markets where people can purchase and trade options in future events, such as who will win an election. The IEM is a repeatable case, and over 49 different elections missed the accurate answer by only a couple percent, and in general did far better than the polling organizations. Another such market, the Hollywood Stock Exchange, is able to predict opening week revenue quite accurately. It is these repeatable cases that convince me.

Surowiecki distinguishes three kinds of decisions: cognition (simple prediction) coordination (several things need to come together) and collaboration (getting disinterested people to actually work together).

He warns that polling of the crowd only work when four conditions are present: diversity of opinion, independence of their opinions and actions, decentralization of their knowledge, and aggregation which collects the judgements.

A large part of the book is about poor decision making. For example, in a group if the individuals can influence each other, they will reduce the ability for the group to make decisions. If discussions are held, then the first people to talk will have a large sway over the group, even if there is no reason to credit the first speakers with more expertise. Groups will tend to discuss, but after a certain point people will go along with the rest, even if they would otherwise vote a different way. There is a big herd mentality that harms the group ability to make decisions.

He points to hierarchies as further mechanism that prevent good decision making. People in an organization defer to decisions from the top, even if that is not likely to make good results. He points to the automotive industry in America during the 1970's and 80's as being out of touch. And a predictable counter example, Toyota's TPS as a way to tap into the crowd.

He finds open source software to be a success story for tapping the wisdom of the crowd. Also, in general, the science community does as well. He covers Zara's ability to product new articles of clothing in an astonishingly short amount of time, ties this to decentralization of the company.

He discusses mass delusion, particularly economic bubbles, when crowds make particularly bad decisions -- but offers no solution. The book, written in 2004, could not anticipate the housing bubble and the financial crisis of 2007/8.

I am by no means convinced that all decisions should be driven by polling a diverse crowd. Yet, the thesis, that uneducated crowds outperform experts, is just surprising enough, just a bit incredible, and yet the evidence is there. The book is well written, and a good starting point to branch out to other resources. Learning to leverage the wisdom of the crowds is something that everyone can benefit from - regardless of your position, managers, workers, researchers, can all benefit from understanding these principles. It is just one of those things that everyone should understand.

http://social-biz.org/

James Surowiecki offers an engaging introduction to the broad topic of the wisdom of crowds. He provides examples and insight into why a group is often more effective than a talented individual. He offers well-written academic and anecdotal evidence within a well-organized volume. The book covers estimates of current and future facts, problem-solving, plus technical, economic and political decision-making. Group estimates, group discussions, markets, decision markets, gambling markets, forecasting, organizational structures and voting are reviewed.

In essence, the author says that a group of independent, diverse, communicative individuals has more information, deeper insight/intuition and better approaches to problems than any single individual. This improved knowledge can often be extracted in a cost-effective manner by using group decision-making approaches. They separate the wheat from the chaff by offsetting random biases and errors. This description of how and why group decisions work is only partially convincing.

Surowiecki uses the models of effective group decision-making to show why bad group decision-making is so common. When individuals are not independent, they can be easily misled by power and influence methods. When individuals are not diverse, they don't have much content to add and are not adept at using the multiple perspective decision-making tools. If they do not communicate effectively, their potential contributions lie buried. Riots erupt when certain feedback loops fail. Individuals and markets create bubbles through the self-interest of promotion or free-riding. Small groups are subject to many known shortcomings. Poorly applied decision making-models deliver predictable results. Hierarchical organizational structures undermine feedback and engagement. Cliques of political elites have their own biases and are no more effective than representative democracy.

This is a broad survey type of book, covering a great deal of interesting ground on related topics. It sometimes oversimplifies or overgeneralizes in a rush to make a convincing argument. The author usually gives each subject a balanced treatment, separating what is supported by research from what is merely speculation.

The author consistently supports possibilities approaches to effective decision-making, even when they are complex and mysterious. The whole is greater than the sum of the parts (ala chemistry versus physics, macroeconomics versus microeconomics and sociology versus psychology). Both/and approaches to strategy, leadership and management are more effective. The principles of effective small groups can be applied, in spite of some conflicts. Important individual political values will be reflected through candidates, even if individuals have limited knowledge or engagement. Corporations will find an optimal balance between the benefits of functional specialization and outsourcing versus the oversight costs and loyalty risks. Effective employees need direction and empowerment. Choices are probabilistic, not certain. Human and technical features can be combined to produce better choices.

For those who share the authors' values, this book provides encouragement about the progress that has been made and the even greater potential for the future. Those who prefer a deterministic, theory X, finance-oriented, command and control, great man, rationalist approach to decisions will struggle with the general tone of the book, identify where it overreaches, question the core underlying argument and argue that the real keys to success are better empowerment of the best individuals and better application of simple tools.

What do the search for a lost submarine, the behavior of the stock market on the day a space shuttle exploded, and the results of a Google search have in common? According to James Surowiecki, they are all dependent on the input of many people, massaged into a single decision that is far more accurate, and regularly so, than the decisions of any of the individuals who participated in those decisions. On the day of the Challenger disaster in 1986, the stocks of many NASA parts suppliers dipped. Within a few hours, all recovered, except for the stock of Morton Thiokol, the manufacturer of the O-rings linked many weeks later to the explosion. But how did stockholders "know" that Thiokol was culpable? Surowiecki explains how the individual decisions of many stock holders combined--with some cancelling out and others reinforcing each other--until a result emerged that no single stockholder could have predicted.

Using simple games and puzzles, Surowiecki tells us how social scientists study human systems that sometimes work against an individual's self-interest. For instance, how many of us even think to challenge the first-come first-served convention of being seated on subways and movie theaters? Why do we tip at restaurants that we know we will never visit again? Why do people generally pay their taxes rather than cheat, and what could change that behavior? Why do people irrationally spend money (or time or emotions) on punishing those who do not follow the rules?

Surowiecki also explains how the wisdom of crowds can fail us. Talkative people, or instance, are often seen as experts when they are no such thing. And the order in which one speaks in a group can unconsciously bias the group for or against a viewpoint, regardless of the merits of the viewpoint. Group wisdom can be thwarted if the groups is homogeneous or when individual decisions are dependent on each other. The smartest groups are diverse--with individuals possessing bits of information not available to others--and independent--allowing the random errors of individuals to cancel out rather than to line up. Take away one or both of these conditions and groups become stupid. In the Challenger example above, it was the fact that thousands of stockholders could decide independently about which stocks to buy that led to the right call on Morton Thiokol. It was also necessary that a mechanism, the stock market, was in place to aggregate those individual decisions.

"The Wisdom of Crowds" is a must-read for those seeking to improve decision-making in any corporate environment here many people participate--schools, churches, offices and governments. The book points not to a mysterious "power of the hive" that is beyond the ability of individuals to understand, but to the sum of day-to-day human interactions that can be tapped to make our lives easier and more manageable, or thwarted to make them miserable.

James Surowiecki explores what many consider a counter-intuitive notion: the answers to many of our most vexing problems are found not in a few expert opinions, but rather in the aggregate judgement of the many. From the weight of a certain ox in England to building a computer operating system that dethrones Microsoft, the crowd has the answer.

The first part of the book delivers the theory; the second offers case studies to back the theory up. Surowiecki shows the repercussions of this theory on automotive traffic, disease management, business, government, science, economics, etc.

In the end, Surowiecki's book is an important first step in understanding how to tackle the new world in which we live, where technology has broken down geographical, cultural, political and other barriers. The power to collaborate is now in the hands of the commoners. Surowiecki's vision of what is to come deserves to be explored further.

I was quite relieved to espy James Surowiecki's book "The Wisdom of Crowds" on the shelf of the airport bookstore. All the other management titles were just ego-stroking pamphlets with wannabe-pithy titles. "The Wisfom of Crowds" stood out because of its behavioral underpinnings, rather than flavor-of-the-month leadership drivel.

The book opens with the story of Francis Galton, who analyzes the results of a contest at a county fair to guess the weight of an ox. Galton averaged the weights that the approximately 800 contestants had wagered, and discovered that the averaged weight was within a pound of the actual weight, an outcome that surprised Galton, who had surmised that the unskilled participants in the contest would have produced a less accurate result.

While the book is rich in similar anecdotes, I was quite surprised there were no charts and almost no mention of statistics.

Relying on anecdotes to prove a thesis can also suffer from selection bias. The author cites the example of the stock market's reaction to the explosion of the space shuttle Challenger as a further proof of the wisdom of crowds (in this case, stock market participants). Within minutes of the news spreading, the stock prices of the four major contractors were hit; in particular, Morton Thiokol. According to Surowiecki, this identification was proof that the "crowd" was able to quickly determine that Morton Thiokol was at fault, and not the other contractors (whose stock prices generally recovered). Yet this kind of drama plays out on a daily basis in the stock market - most recently in the case of the BP Oil spill. Sometimes the market figures out which culprit will pay the heaviest for a disaster; sometimes it doesn't. In order to contribute to his thesis the author should provide statistics - how often does the crowd make the right identification? When the crowd is wrong, what is the cost? How reliably does the crowd make the right choice? The author may just be citing examples that reinforce his point, and ignoring the larger universe. Without some statistical scaffolding the author doesn't have a thesis - just an anecdote.

The book is copyrighted in 2005. Many of the principles the author discusses are timeless, and the studies he cites don't suffer from the passage of several years, but the author frequently makes references to things that made sense 6 years ago but make you scramble for google today - for example, how do I know what the movie Gigli did at the box office? It would be nice to read an updated edition with some of the dated references thrown out, yet including some of the crowd behavior of the last five years. For example, on page 240 the author states, "... you don't see bubbles in the real economy". Given the runup in housing prices in 2005, and subsequent crash a few years later, I'd like to read Surowiecki's thoughts on the housing bubble, which definitely manifested itself in the real economy.

The book is an interesting read when Surowiecki references other studies, such as Milgram's experiments or William Vickrey's studies, but falls down when Surowiecki tries to advance his own theories. I highlighted many of the pages where I plan to do further reading, and appreciate the author bringing a number of interesting sources together. It's a good but shallow read on behavioral science and behavioral economics, just perfect for a plane trip.

Blogging, Twitter, Facebook, MySpace, and other social networks are the results of Web 2.0. But what do they mean? To many people they are the new noise on the internet. But there is something going on, under the current, that can change the corporations that recognize that they can leverage these networks. It may not even be apparent to those that are heavy users of these social networks. What you have, at a high level, are crowds of very diverse people coming together under the umbrella of social networks. James Surowiecki, author of The Wisdom of Crowds, has tapped into these networks, and more, to provide you with a very readable, enjoyable look at these emerging networks.

Contents: The Wisdom of Crowds; The Difference Difference Makes: Waggle Dances, the Bay of Pigs, and the Value of Diversity; Monkey See, Monkey Do: Imitation, Information Cascades, and Independence; Putting the Pieces Together: The CIA, Linux, and the Art of Decentralization; Shall We Dance?: Coordination in a Complex World; Society Does Exist: Taxes, Tipping, Television, and Trust; Traffic: What We Have Here Is a Failure to Communicate; Science: Collaboration, Competition, and Reputation; Committees, Juries, and Teams: The Columbia Disaster and How Small Groups Can Be Made to Work; The Company: Meet the New Boss, Same as the Old Boss?; Markets: Beauty Contests, Bowling Alleys, and Stock Prices; Democracy: Dreams of a Common Good; Acknowledgements; Notes

Surowiecki begins the book with a look at an ox weighing competition from 1906. Francis Galton, believed that only a select few were capable of keeping societies healthy. Breeding mattered and the unwashed crowds did not have the mental capacity to make any decision of importance. After the ox weighing competition, Galton was provided with all the crowds' guesses. He believed that the crowd would be off by a magnitude and that only one or two people would have guessed the correct weight. However, after tabulating the results, he found that the average guess was 1,197 pounds. The actual weight was 1,198 pounds. The crowd's guess was perfect. This is at the heart of Surowiecki's book; There is a huge, intelligent crowd out there and you need to understand how to tap into it and use it. He examines all sorts of crowds; traffic, the CIA and NASA, the stock market, and more. Each holds valuable lessons in using the wisdom of crowds which can be applied to many situations.

Social networks are an important result of Web 2.0. For many people, and corporations, they seem to simply be another example of the internet wasting people's time. Surowiecki makes you sit up and recognize the value of these new methods of tapping into the crowd with this enjoyable, highly recommended book. While the internet makes connections easier, throughout history you see that visionaries use the crowd to predict election outcomes (and it isn't through polls), horse racing results, and more. Even using the wisdom of your employees, you can create better products, find new markets, and change the rules of competition. If you want to understand the value of social networks, how to leverage them, or how to truly empower your employees, this book is a "must read." Not only does Surowiecki help you use these networks, he also provides guidance on how to correct poor performing small groups.

THE WISDOM OF CROWDS: WHY THE MANY ARE SMARTER THAN THE FEW AND HOW COLLECTIVE WISDOM SHAPES BUSINESS, ECONOMIES, SOCIETIES, AND NATIONS by James Surowiecki was a wonderful book for anyone who works with decisionmaking groups. While it deals with many crowd and mass issues, at its core is really useful information about how to make sound decisions in groups -- something all of us have to deal with every day in our jobs and daily life.

The book starts out with a fascinating story that challenges our assumptions about how useful/correct aggregate information is when assembling the opinions of a crowd of people. In 1907, British scientist Francis Galton found that a crowd of fairgoers, guessing on the weight of an ox after it had been slaughtered and dressed. It turns out that the average of the crowd's guesses was 1197 and the actual weight was 1198. This surprised Galton and surprises us, as we often think that the outcome of a group's process is likely to be wrong (how many slams do we hear about the products of committee work?), but this incident illustrates that collective wisdom can be nearly perfect.

Throughout this readable and interesting book, Surowiecki -- the Financial Page writer for The New Yorker -- illustrates how groups can make wise or unwise decisions, focusing on the need for individuals in the group to have an independent focus and for the group to aggregate members' knowledge. Because individuals' grasp of any situation is likely to be incomplete, compiling knowledge of the group often creates a pool of knowledge that is more complete and in-depth than any one member's knowledge, but the independent factor mitigates the negative effects of group decisionmaking: group think.

Surowiecki illustrates well throughout his chapters the importance of diversity in groups that are making decisions, the part that information cascades play in crowd responses (and markets), how decentralization can contribute to crowd wisdom, how coordination is necessary to assemble group wisdom, how taxes and trust work together for group benefit, how traffic is an artifact of individual and group action, how science benefits from crowd wisdom, how the Columbia crash illustrates poor small group decisionmaking, how markets benefit from crowd wisdom and how democracy benefits as well.

Surowiecki's writing brings up issues I've read about in books by Francis Fukuyama and Dietrich Dorner and articles by Chris Argyris. Benefiting from Surowiecki's experience writing about complex issues for a mass audience, THE WISDOM OF CROWDS is very readable, fascinating and applicable to daily life. I strongly recommend it.

This book does an excellent job of reporting important evidence showing that group decisions can be wiser than those of any one individual. He makes some good attempts to describe what conditions cause groups to be wiser than individuals, but when he goes beyond reporting academic research, the quality of the book declines. He exaggerates enough to give critics excuses to reject the valuable parts of the book.

He lists four conditions that he claims determine whether groups are wiser than their individual members. I'm uncertain whether the conditions he lists are sufficient. I would have added something explicit about the need to minimize biases. It's unclear whether that condition follows from his independence condition, partly because he's a bit vague about whether he uses independence in the strong sense that statisticians do or whether he's speaking more colloquially.

Sometimes he ignores those conditions and makes unconvincing blanket statements that larger groups will produce wiser decisions.

He makes exaggerated claims for the idea that crowds are wise due to information possessed by lots of average people rather than the influence of a few wise people. For instance, he disputes a Forsythe et al. paper which argues that a small number of "marginal traders" in a market to predict the 1988 presidential vote were responsible for the price accuracy. Surowiecki's rejection of this argument depends on a claim that "two investors with the same amount of capital have the same influence on market prices". But that looks false. For example, if the nonmarginal traders make all their trades on the first day and then blindly hold for a year, and the marginal traders trade with each other over that year in response to new information, prices on most days will be determined by the marginal traders.

It's not designed to be an investment advice book, but if judged solely as a book on investment, I'd say it ranks in the top ten. It does a very good job of explaining both what's right and what's wrong with the random walk theory of the stock market.

He does a good job of ridiculing the "cult of the CEO" whereby most of a company's value is attributed to its CEO (at least in the U.S.). I was surprised by his report that 95% of investors said they would buy stocks based on their opinion of the CEO. They certainly didn't get that attitude from successful investors (who seem to do that only in rare cases where they are able to talk at length with the CEO). But his claim that "Corporate profit margins did not increase over the course of the 1990s, even as executive compensation was soaring" looks false, as well as being of questionable relevance to his points about executives being overvalued. And I wish he had also applied his argument to beliefs of the form "if we could just elect a good person to lead the nation".

Chapter 6 does a good job of combining the best ideas from Wright's book Nonzero and Fukuyama's Trust (oddly, he doesn't cite Trust).

He exaggerates reports that the stock market responded accurately to the Challenger explosion before any public reports indicated the cause. He claims "within a half hour of the shuttle blowing up, the stock market knew what company was responsible." I don't know where he gets the "half hour" time period. The paper he cites as the source says the market "pinpointed" Thiokol as the culprit "within an hour", but it exaggerates a bit. If the percent decline in stock price is the best criterion, then the market provided strong evidence within an hour. If the dollar value of the loss of market capitalization is the best criterion, then the evidence was weak after one hour but strong within four hours.

He also claims "Savvy insiders alone did not cause that first-day drop in Thiokol's price.", but shows no sign that he could know whether this is true. He seems to base on the absence of reported selling by executives whom the law requires to report such selling, but he appears to overestimate how reliably that law is obeyed, and to ignore a large number of non-executive insiders (e.g. engineers). He does pass on a nice quote which better illustrates our understanding of these issues: "While markets appear to work in practice, we are not sure how they work in theory."

Being a huge proponent of teams, I felt compelled to pick up James Surowiecki's book at my local bookstore. I'm also a big fan of his contributions to the Wall Street Journal and The New Yorker. And then a few of my buddies suggested the book. I call this "triangulation," when three completely different events collide. For me, it's like a huge, neon, pulsating arrow saying "read me!"

In a nutshell, this book reinforced my faith in large groups. Surowiecki's premise is this: "Large groups of people are smarter than the elite few, no matter how brilliant - better at solving problems, fostering innovation, coming to wise decisions, even predicting the future. The intertaining vignettes (similar to Malcolm Gladwell's style in The Tipping Point and Blink, two other wonderful books on collective and individual decision making), Surowiecki describes the conditions for group wisdom (diversity, independence and decentralization) and examples that support his premise. His stories range from popular culture, psychology, biology, economics, artificial intelligence, military history, political theory - a veritable potpourri of instances where the wisdom of crowds flourish as well as flounder. Makes you think a bit differently about all kinds of things including why I have "bad line karma" where the line I am standing in is always the longest.

For over a decade, I have taught others to "trust the team." Now I know why...as well as the three conditions for group wisdom - another version of triangulation. I also have a myriad of everyday examples of how the many are smarter than the few. Now that can restore anyone's faith in group process!

Why do so many "experts" make disastrous decisions? Why do most mutual fund managers under-perform the S&P 500, despite their MBA training and years of investing experience?

Those are some of the questions that James Surowiecki tries to answer in "The Wisdom of Crowds." First published in 2005, this chatty little book fits into the same general category as Malcolm Gladwell's "Tipping Point" and "Freakonomics" (by Steven Levitt and Stephen Dubner). Essentially, these authors have found a way to make academic research into social behavior interesting.

I think Gladwell takes the crown for best writing, while Surowiecki falls short on the entertainment scale. "The Wisdom of Crowds" is at turns fascinating and somewhat boring. The author doesn't seem confident enough to make a point without undercutting it on the next page. Maybe that's balance -- maybe it's just poor editing. Anyway, here's the basic argument: Together, we are almost always smarter than we are individually, particularly when it comes to decision making.

What Surowiecki's really talking about isn't a crowd or mob but an open marketplace of opinions. To function effectively, he says, this opinion marketplace must be diverse, independent and decentralized. Also, there must be some mechanism in place to "aggregate" opinions, such as the voting booth, gambling board or stock market. In fact, Google uses this basic approach to rank the millions of sites on the World Wide Web.

While the opinion marketplace works well in many cases, it fails miserably when the crowd is too homogeneous or dominated by a few powerful individuals (e.g., the White House during the Bay of Pigs invasion). The real lesson of Surowiecki's book is that leaders should insist on a wide variety of opinions from different sectors before making an important decision. Have the courage to listen to people who vehemently disagree with your position and don't punish those who challenge your conclusions. They may just see something you don't. (Hello, Washington!)

Final Note: If you want to have a little fun, read "The Wisdom of Crowds" at the same time you're reading "The Madness of Crowds," the 1842 classic by Charles McKay. Strangely enough, they actually complement each other once you get past the titles.

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.

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.

This book raises a variety of paradoxes. I've had a lot of fun sharing them with friends. Consider the title claim: "Why the Many are Smarter than the Few". This is not particularly straightforward. If crowds are smart, why are herds so stupid? Yes, "two heads are better than one". But, "a camel is a horse designed by committee". If two are smarter than one, is two-thousand-one smarter than two-thousand?

Surowiecki starts with a puzzling factoid: a collection of uninformed opinions is an informed opinion. 'Guess the jelly beans in the jar' examples demonstrate this. Ask any crowd the number of jelly beans in a jar, and the average guess is statistically correlated to the 'actual' count. This game gets a bit more complicated when the 'crowd' is asked to guess how many jelly beans I'm thinking of putting in the jar (democracy) or 'guess how many jelly beans the crowd will drop in the jar' (the stock market), but there is a linkage between all 3 questions.

The next 4 chapters try to identify preconditions for 'crowd wisdom':

1. Diversity of opinion (Chapter 2)

2. An information cascade that convinces first 2 or 3, then larger and larger groups, that 'a 3rd party idea is better than mine'. (Chapter 3)

3. A decentralized decision making process which allows 'the best solution' a chance to be the 'chosen' action for the group. This includes protection from those that might disagree with your opinion. (Chapter 4)

4. A mechanism for 'members' to keep up with behavior of the whole. For Surowiecki, this role is filled by 'markets' reporting 'current prices'. (Chapter 5)

In the process of covering all these issues, we have gone from 'counting jelly beans in a jar' to 'designing successful organizations'. The new focus is entertaining, but Surowiecki seems to lose grip of his subject matter. In one chapter concern for the well-being of group members is necessary to support diverse opinion, in the next the concern for 'well-being' is a source of 'group-think' and 'no changes allowed' attitudes.

Though Surowiecki might disagree, much of the remaining material tries to make sense of self-interest. Specifically, does 'self-interest' hinder or inspire 'crowd wisdom'? We get a variety of case studies, but most readers will find Chapters 7 thru 12 simply wander. Chapter 7 addresses the 'selfish' automobile driver. We need that driver to be interested in protecting his own 'life', to trust that he won't drive on the wrong side of the road. But, too much self-interest produces 'road rage'. Chapter 8 addresses the 'selfish scientist', who at times honorably seeks professional recognition for his work, but at times will use tenure to squash the ideas of upstarts. Chapter 9 addresses the paradox of the selfish boss. We need small team-leaders, each trying to succeed in their small domain, but they have to stay small or the dynamics get messed up. Chapter 10 addresses the paradox of the boss who wants to 'reform' the company, but protect his perks. Chapters 11 and 12 suggest solutions to these conundrums of selfishness: markets and elections.

My favorite exercises in college were always related to Game Theory. I'm guessing that James Surowiecki has a similar penchant, which would explain why his book is one of the most accessible volumes dealing with elements of it. My biggest critique is a personal one, that the book contain more of the actual mathematical analysis of his case studies. Of course, that would've made the work less accessible, less popular and I might have never read it.

Crowds are wiser than individuals when it comes to particular applications of problem solving involving cognition, coordination, or cooperation. He argues that the average answers of a diverse group will yield more success than individual experts regardless how intelligent the individual may be. Surowiecki then illustrates his thesis with some great examples from Jelly Beans in a Jar to the search for the lost U.S. submarine, Scorpion.

Businesses, he urges would do much better if they allowed the decision and prediction processes to be guided by larger groups. But the makeup of the groups is important: Diversity of opinion, meaning each person should have private information; Independence of the members instead of 'follow the leader'; Decentralization, meaning the members are able to specialize; and Aggregation, meaning there exists mechanisms that empower the group decisions bringing them to reality.

It's a fun read and bound to change the way you view organizational structures. I highly recommend it.

- CV Rick

Are two heads really better than one? What about three heads, or a whole crowd of heads? Under what conditions can a crowd outthink an individual, and vice versa?

This book demonstrates that human knowledge bears a surprising resemblance to ant knowledge: to a surprising degree, it isn't concentrated in any individual, rather, it is distributed throughout the population. If we can find effective ways of aggregating this knowledge (such as majority voting, or averaging a large number of guesses) we have a new powerful tool in our epistemic toolbox.

But what sets this book apart from typical books of the type is that the author is quite clear under which conditions the crowd is wiser than the individual. For the crowd to be wiser, it is very important that the opinions of each individual in the crowd were formed independently of each other. A crowd can be as stupid as an individual if they suffer from "groupthink" where they are somehow compelled, through social pressure or force, or propaganda, to adopt a minority viewpoint.

As such, this book can be read as a defence of free speech, freedom of thought, and individual rights. Yes, crowds _can_ be wiser than individuals, but only certain kinds of crowds. If we slavishly act like a herd of cows, moo-ing in unison, we're unlikely to be smarter than any individual cow. But if each individual represents an independent viewpoint, and if we can nevertheless come to a reasoned concensus, we have a fighting chance. This book demonstrates the immense power of the ability to reach the _right_kind_ of concensus.

The main idea is that information can be aggregated very efficiently across a population of relatively ignorant individuals if you can set up the right mechanism (e.g. a marketplace) and can be used to make very good predictions. Experts, on the other hand, are very bad at making predictions - worse, the more confident they are, the less accurate they are. Its a far cry from saying that crowds are wise, but it is very interesting, in particular for economic forecasting, for investment decision or for business management. For a more focused study of overconfidence and cognitive biases in decision-making, I recommend James Montier's Behavioural Investing (which covers a broader ground than just investing).

Apart from this idea, the books is a collection of anecdotes in topics ranging from game theory, behavioral finance, psychology, business, zoology (the life of ants) which are more or less related to the idea of wisdom of the crowds. All these anecdote are expounded with talent and intelligence and well worth reading, even when they contribute little to the main thesis. The last chapter, proclaiming the author's confidence in democracy, is original. Like he says, democracy is more a system for aggregating individual preferences than a decision-making or information-gathering mechanism.

Surowiecki wrote a very readable book on how and when groups aggregate information to make better decisions than even the wisest individuals, and how and when group dynamics leads to suboptimal results. It's to be expected that in a popular book like this that examples would be simplified and stretched to fit an argument, but I found them to be quite reasonable at the core. Moreover, the thesis itself is quite nuanced and far from a pean to the God of the Market.

The first part of the book covered the basic ideas of collective wisdom, particularly the different kinds of problems collective decision making units are able to solve, and the conditions needed for them to be successful. The second part of the book was a collection of case studies: automobile traffic, scientific research, small groups, corporations and the CEO, capital markets, and democracies. The case studies provided insight into what makes collective wisdom so effective, what limits individual and small groups from being as effective (particularly in trying to govern or command an economy), and also what can lead to collective idiocy.

The biggest thing I took away from this book was a renewed faith in democracy, the power of markets, and the scientific enterprise. I also came to understand better why extreme socialist or laissez-faire policies inevitably lead to failure.

William F. Buckley once famously observed, "I would rather be governed by the first 2000 names in the Boston phone book than by the Harvard faculty." It would appear that Mr. Buckley may have been on to something, as James Surowiecki demonstrates in this fascinating work.

"The Wisdom of Crowds" examines a highly counterintuitive phenomonon: the fact that in many cases, a group of random individuals will consistently outperform any one person. While this seems illogical, Surowiecki does a very good job of laying out how and why crowds can outperform individuals. Better still for those seeking better ways to do things, Surowiecki carefully explains the characteristics that allow groups to perform well, and the traps that groups can fall into that lead to problems like groupthink and panics. While more research into the phenomon will doubtless be required in order to make good use of it, Surowiecki's work is an important starting point well worth a read.

Surowiecki uses a vast number of examples to illustrate his points, a technique that I found quite interesting and entertaining. His writing style is very fluid, making the book a quick read, both informative and interesting.

For anyone interested in learning how to make better decisions, "The Wisdom of Crowds" is a great place to start learning.

If you loved The Tipping Point by Malcolm Gladwell you'll probably enjoy this most unusual book. Gladwell's front cover endorsement of The Wisdom of Crowds reads "dazzling...the most brilliant book on business, society and everyday life that I've read in years". Both authors are New York based investigative journalists with a deep interest in social change.

Subtitled "why the many are smarter than the few", The Wisdom of Crowds argues that "if you want to make a correct decision or solve a problem, large groups of people are smarter than a few experts". We had a great example of this in the Australian election before the last one. The polls, both nationwide and in marginal electorates, repeatedly predicted a knife-edge result, with the lead changing often from pollster to pollster and from poll to poll. But throughout the campaign the betting agency Centrebet (in response to bets placed) had the (incumbent) government coalition parties firm favourites. Close to polling day the Prime Minister was $1.16 for a win (for a $1 bet) while the Opposition Leader was $4.60 for a win. The gamblers continuously predicted a landslide to the government coalition, and so it was. The polls were wrong. The crowds had the wisdom.

The first half of The Wisdom of Crowds is mostly theory, but with loads of examples. It covers the main types of problems we encounter: cognition, coordination and cooperation problems. Then it outlines the governing conditions for crowds to be wise: diversity, independence, and "a particular kind of decentralisation". The second half is mostly case studies organized into chapters on: traffic, science, small groups, companies, markets and democracy.

Apart from guarding against "groupthink", particularly at executive level, it's not easy to see how communication professionals can translate the message of The Wisdom of Crowds into organizational action, despite the claim that this is a book "for anyone interested in what makes things happen". Certainly there is a clear warning for gung-ho leaders who don't consult broadly (such as the Australian political leader who lost the recent election).

For communicators, my first thought was that to get "many" involved in significant organizational decisions suggests greater use of "future search" and "appreciative enquiry" techniques (such as the BBC consultation and involvement efforts in recent years). I'm sure this is the case, but there was no mention of such techniques as far as I could see (and despite lots of reference notes and suggestions for further reading, there is no index in an "academic" book of 295 pages).

In short, a wonderful, mind-expanding read but don't expect loads of ideas about how to improve communication in your organisation.

James Surowiecki's "The Wisdom of Crowds" is a readable and understandable book that attempts to bring an esoteric concept and present it to the layman. Surowiecki's thesis is simple: a group of people that is diverse, independent, and decentralized usually reaches a better solution to a problem than even the best experts.

Surowiecki is a columnist with the "New Yorker," and the book reads like a collection of columns, with short, digestible sections discussing smaller ideas that all lead to his thesis. He uses case studies, sociological experiments, stock market activity, and other research to build his case. Although he offers many qualifications, he does a very good job showing that the marketplace of ideas usually produces the best answer.

"The Wisdom of Crowds" sets out what it means to do and helps explain how the world actually works - why the experts are often wrong and why the majority is usually right. While it may be beneficial to managers and leaders looking to incorporate these ideas into their leadership styles, it is a great read for almost anyone wanting to understand a little more about human behavior and how the world works.

Surowiecki is a talented writer and one, who along with "Blink" author Malcom Gladwell, utilizes a writing style that includes myriad interesting scientific studies and historical anecdotes. He starts off with a fascinating story about some fair, at which he witnesses hundreds of people guessing the weight of a cow. No one got the exact weight of the cow, but the average guesses from everyone in the crowd was right on the money. This may seem like a coincidence, but Suroweicki goes on to describe many cases where the many come to astonishing conclusions, that the few could rarely come to.

One of the most interesting aspects of the book is the description of open source- the future of software. He also describes economics games and real economics like stocks and how millions of traders can "know" something without knowing it and how it's nearly impossible to win when betting on the NFL. Also, he includes ways in which groups of people don't provide a better answer than the expert, and in fact, explains how, in some situations, the masquerade of diverse thinking coupled with the detrimental "group think" can lead to disastrous results (e.g. the 2003 shuttle tragedy).

It's not explicitly layed out to the reader, but Suroweicki's ideas show how a democratic government will always be more beneficial to its people than a centralized small group.

It's a very fascinating book, and I recommend it exuberantly.

This book defines three types situations or problems in which crowds come together. Cognitive problems are situations when we need to decide on the most likely outcome of a certain event like guessing the winner in the presidential polls. The second type of problem is termed as coordination problem when groups need to coordinate their behavior as drivers do on a highway. The next level is the problem of cooperation where self-interested and distrustful individuals need to contribute and work together even when narrow self-interest would dictate not to do so. The system of taxation is an excellent example of this type of problem.

Then there is a good definition of four parameters ( if I may use the term) of Diversity, Independence, Decentralization and Aggregation under which groups operate. The book starts with examples of situations where groups of ordinary individuals with average knowledge outperform experts in specific cases on cognitive problems and it proceeds to discuss situations under coordination and cooperation problems. There are situations when crowds are remarkably accurate in their collective judgment or wisdom, while in certain situations they are absolutely dumb. Hence it may not be right to say that the crowds are always right. Bubbles in financial markets should confirm this. Traffic jams is another example that we witness every day. The question then on the judgment or behavior of crowds is under what circumstances do crowds know better or do better and when to rely on them for their collective wisdom and equally important, when not to rely on them for they may be far away from reality in certain situations. Scores of examples are discussed in this book under separate chapters for each problem and we do get some good insights and understanding of the topic from the cases discussed.

Is it possible to evolve a framework for the three types of problems and the four parameters to predict outcomes under various combinations of these ? In my opinion it is worth attempting one such framework that can at least suggest the most probable outcomes under different situations. If so, I would recommend this to be added as an annexure in the next edition of this book.

Based on some famous and telling examples, Surowiecki spends the first third of this book to show that the average of many peoples judgments is generally better than even the very best individual. This holds true even when the crowd is made up of average joes, and the individual is a true expert in the field.

However, certain circumstances are quintessential, the most important being independence: the joes must make their judgments independently of each other. This point is very important. The wisdom of crowds is not the wisdom of groups, but the aggregated wisdom of all the members in the crowd. There are many ways to make your bunch of people behave like a group, which in general is not wise. Further must making the right judgment have positive consequence. This is why information markets are usually better at deciding who will win elections than polls are: the participants must put their money into the game.

Surowiecki does an average job explaining the textbook problems of collective actions, although he does not move any stones for me here. The last part is case studies. I found the one about financial bubbles the best, where the wisdom of crowds-theory fits nicely. During a bubble, a lot of investors are not investing based on their own judgments, but on the groups. If that is the case, adding another investor will not make the crowd wiser, rather the opposite in certain situations.

A drawback of the book is mostly of the presentation. Why is there no index in such an academic-wannabe text? Why are there no thorough bibliography (the sites mentioned at the end does not contain the promised one)? Still, the book is highly readable. I recommend it together with Paul Seabrights The Company of Strangers. Both really make you think profoundly about the basic foundations, both of the broader society and the place you go to work.

According to the author, groups do better than individual experts: "Under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them."

Groups might not find the one ultimate solution, but possible solutions. By aggregating the decisions of many individuals the errors will cancel out and you are left with a very good decision. The point is that for complex problems there is no "expert" who completely and thoroughly understands the problem, and can thus give the "right" answer. A group of people, because together they have more information, can make better choices. The author found that a group of experts, who all tend to have a similar viewpoint on a particular topic, may make a worse decision than a group with a few "less smart" people who will see a problem from different viewpoints.

We believe the solution to our complex problems lies in finding the right person, when all we have to do, Surowiecki argues, is ask the gathered crowd. In his book he uses many examples to demonstrate this.

(a) When the American navy was looking for the sunken submarine Scorpion back in 1968, they employed group dynamic to pinpoint a possible location. The group was able to pinpoint the submarine to within 220 yards!

(b) The collective people's opinions are generally dead on - even when individual opinions vary. For example, the TV studio audience of Who Wants to Be a Millionaire guesses correctly 91 percent of the time, compared to "experts" who guess only 65 percent correctly.

(c) In 1906, British scientist Francis Galton discovered that a crowd of non-experts at the West of England Fat Stock and Poultry Exhibition proved surprisingly competent at guessing the weight of an ox to within a pound. To his surprise, when he averaged the guesses, the total came to 1197 pounds. After the ox had been slaughtered, it weighted 1198.

(d) Within hours of the Challenger Space Shuttle explosion the stock market picked which company was responsible, and dumped its stock, long before there was any clear understanding of what had happened.

(e) How does Google's Page rank algorithm help us find the right information almost each and every time? Google's search engine relies on the feedback of the millions of users to rate its pages.

(f) In an experiment, groups were able to come very close as to the amount of beans in a jar.

(g) Linux is an example of group cooperation, and has become a real challenge to the Windows operating system. With its open source system, all programmers worldwide can contribute in updating it and fixing bugs, making it a very secure and stable platform. His central theme in the book is that it is better to cooperate together despite our self-interest.

(h) Science relies heavily on group cooperation. SARS, for example, was isolated and its cause known in weeks rather than in months or even years thanks to cooperation from scientists from all over the world. This feat was accomplished without an organization being in charge. Now that's cooperation at its best!

(i) Crowds on city sidewalks manage well to avoid bumping into each other, as if the whole group was one individual.
When are groups smart, and when are they foolish? Surowiecki does not believe that crowd choice is always superior, and he provides many examples of poor collective behavior as counterpoints to his main thesis. Groups make better decisions ONLY if certain conditions are met. The conditions are:

(a) Diversity of opinion (different information, views, and opinions are used to make the decision. Diversity guarantees that multiple perspectives are brought into the decision-making process and that a broader range of information is included).

(b) Independence (no one person is dictating the decision and that people are using their own experiences. In other words, people's opinions are not determined by the opinions of those around them).

(c) Decentralization (people draw on `local experience'. The chance to achieve collective wisdom is greatest when individuals get a chance to bring their own information and experience into the process).

(d) Aggregation (turning private judgments into a collective decision).

An example of when group think failed was the Columbia explosion.
Some thought provoking questions the author raises: (a) why do people tip even at restaurants that they know they will never return to, and at restaurants in cities thousands of miles away from their homes? (b) Why do people bother to vote when they know there votes will not make a difference? (c) Why is the price of a movie at the theatre the same whether it is a blockbuster or a complete flop? (d) Why are American corporations wasting their money by paying top executives too much? For example, the author cites the example of Dick Grasso's NYSE pay package which outraged the public and led to him getting fired.

Not all readers will agree with the author. One reviewer writes, "I wonder whether 10 great surgeons looking into the pros and cons of a critical heart surgery would come out with a better solution or would the opinion of experts from diverse fields be better!"

It is unusual to come across an idea presented so clearly that one modifies a prior belief into its antithetical posterior form. Occasionally, we find that our prior belief may have been relevant to a special, rather than a general case. Having cut my teeth on Mackay's Extraordinary Popular Delusions and LeBon's The Crowd, I approached James Surowiecki's The Wisdom of Crowds (Doubleday, 2004) with a healthy dose of skepticism. The value in Surowiecki's effort, with its seemingly oxymoronic title, is his presentation of evidence of what previously seemed to be evidence of group madness as special cases of a more general spectrum of collective decision-making.

One of the first examples in The Wisdom of Crowds is Jack Treynor's 1987 FAJ article, Market Efficiency and the Bean Jar Experiment, a classic example of crowd wisdom. Surowiecki also refers to other finance literature, including Arrow and Debreau's Existence of an Equilibrium for a Competitive Economy, Black's Noise, Schleifer's Inefficient Markets, Thaler's The End of Behavioral Finance, Kahneman, Slovic and Tversky's Judgement Under Uncertainty, Hayek's The Use of Knowledge in Society, MacKenzie's Mathemetizing Risk, Lowenstein's When Genius Failed, Schiller's Market Volatility, Jensen's Paying People to Lie, Coase's The Firm, the Market and the Law, Sharfstein and Stein's Herd Behavior and Investment, R.K. Merton's The Matthew Effect, and many others. These citations are woven into a wonderfully readable tale that makes a strong case for the consensus-based approach to equilibrium modeling in finance.

The scope of The Wisdom of Crowds is much broader than just finance and markets. A wonderful use of Thomas Bayes' theorem is recounted, in which the location of the lost submarine Scorpion was predicted in 1968 by group consensus to within 220 yards of the actual spot where the navy found it five months later. Other interesting examples include Google's now famous Page Rank Algorithm; Wharton Professor Scott Armstrong's work on the value (or lack thereof) of expertise; the efficiency of beehives, ant colonies and Linux; Macaque monkeys learning by imitation; the ultimatum game as a demonstration of why the public (or at least Eliot Spitzer) is outraged by Dick Grasso's NYSE pay package; the rapid discovery of the SARS virus; why traffic jams occur; why democratic voting is effective as well as why markets such as the University of Iowa's Iowa Electronic Markets are often better predictors of political contests than polls are. We also find offshore tax evasion techniques discussed as a classic example of a cooperation problem, and many other fascinating examples.

The first part of The Wisdom of Crowds explores three basic kinds of economic problems: cooperation -- the tension between self-interest and group-interest, coordination -- group members organizing their behavior, and cognition -- problems with a definitive solution. Surowiecki posits three necessary conditions for crowd wisdom: diversity, independence, and decentralization. The title notwithstanding, Surowiecki does not believe that crowd choice is always superior, and he provides many examples of poor collective behavior as counterpoints to his main thesis. What is especially valuable here is the identification and discussion of the missing necessary conditions in such malignant cases. This framework of three types of problems coupled with three necessary conditions provides an elegant taxonomy by which the reader is free to evaluate the level of group wisdom (a la Surowiecki) or delusion (a la Mackay). So, despite its lopsided title, The Wisdom of Crowds provides a framework for understanding crowd behavior whether the consensus is beneficial or perverse.

The second half of the book consists of a wonderful collection of case studies: coordination problems in pedestrian and automobile traffic; collaboration problems in science; cooperation problems faced by committees, teams and juries; corporate organization and governance; market dynamics, structure and asset pricing; and democratic political systems are each covered in an eminently readable way. The discussions of investor overconfidence, anchoring and herding are especially good.

Surowiecki presents a 20-year horizon in his examples of asset pricing -- "If Pfizer's stock price today makes it worth $280 billion, then for the market to be right, Pfizer will have to generate $280 billion in free cash over the next two decades." His point, echoing Fischer Black's Noise, is that determining present value is "an absurdly difficult task" - but his conclusion that, "If twenty years from now we could look back at that number and say it was accurate, I think we'd count that as miraculous," centers on all the unknowable interim factors exclusively... I would add that an equally difficult task is determining the appropriate time horizon, which for corporations is really perpetuity, not twenty years. Surowiecki concludes, "Twenty years from now, we'll know whether Pfizer's stock price on January 1, 2004, was accurate." Now, since PFE listed in November 1972, we have plenty of 20-year observations to choose from, so perhaps Surowiecki could have told us on January 1, 2004 whether the market priced PFE accurately on January 1, 1984. Most assuredly, it was not; the problem here is that we cannot ever know, since Surowiecki's horizon (or any finite horizon) is not the market's horizon. It seems he has run afoul of yet another joint hypothesis problem in finance. This small nitpick aside, the discussion is excellent and well worth the read.

The Wisdom of Crowds is a well-argued contrarian counterpoint to the commonly received counsel that crowds are by their very nature delusional and mad. The quality of Surowiecki's argument is enhanced by the scope of his presentation, which neatly encompasses both the point and the counterpoint. There is an extensive notes section supporting the material, and with its many references, this book also deserves an index section. Perhaps Surowiecki will add an index to the publisher's website for the book, [...], which currently has a page where you can have fun making your own guess in a virtual replication of the famous bean jar experiment.

James Surowiecki writes a brilliant and often provocative business column in The New Yorker, and he applies a challenging attitude in everything he writes: turning a 700 word case study very often into a powerful big idea.

Here he argues that far from being a mindless herd of idiots, the collective wisdom of a group of people can very often (not always) outshine the work of experts who know the subject. The author calls on a series of rather good case studies to argue the point - for example the way the public punished Thiokol in the sharemarket long before the cause of the Challenger explosion had even been established. (And without any influence from insider trading.) How does the collective gut instinct get this kind of thing so right? And how does the Hollywood Stock Exchange HSX pick tomorrow's hit movies so accurately - before these films ever get released? I'm sure a few movie moguls would kill to have such an accurate track record as the "mindless public."

Surowiecki sets out a number of conditions that facilitate the wisdom of crowds, and explains why sometimes the public doesn't get things so right.

I'm far from the only market researcher who has reviewed this book, and from a professional point of view the volume counterbalances a lot of argument we hear about how the public, or public polls get things "so wrong, so often." In essence the book offers a vote of confidence in the common-sense of the public.

However let's not ignore that there are counter-arguments to Surowiecki's case, and I wasn't satisfied that the author had explored these ideas. For example I've read scientific journals that suggest that group-decisions are usually smarter than individual decisions purely because a group has a greater chance of containing at least one expert within its ranks - but this idea isn't raised or argued here.

Towards the end of the book I had a palpable sense that the author had run out of energy: the main points, and Surowiecki's characteristic vitality are evident more in the first half.

I give the volume four stars though. The Wisdom of Crowds forms an important part of the jigsaw of understanding how today's networked, internetted society really functions. I enjoyed this book immensely. Power to the people!

Intellectuals have often denigrated the abilities of people acting as a crowd. Gustave Le Bon's "The Crowd" (1895) portrayed the folly and stupidity of people acting en masse. Charles McKay titled his classic work, "Extraordinary Popular Delusions and the Madness of Crowds" (1841). Nietzsche wrote, "Madness is the exception in individuals, but in groups...it is the rule." But then along comes James Surowiecki, in his "The Wisdom of Crowds" (2004), asserting that under the right conditions, crowds typically make better and more informed decisions than even expert individuals.

The era of new technology has highlighted the power of collective wisdom under the right conditions. Consider Google, the most effective and popular general search engine, which amounts to a popularity contest by hyperlinks. Many cooks enhance the soup.

What are these "right conditions" for sound group decision? According to Surowiecki, you need: 1. diversity of opinion, 2. independence in reaching decision, 3. centralization (local knowledge) and 4. aggregation (a mechanism for sharing information and judgment effectively).

Surowiecki, a staff writer for the New Yorker, cites many experiments and historical cases in support of his hypothesis. Consider how the audience consistently outperformed hand-picked experts on "Who Wants to be a Millionaire?"

Surowiecki's thinking may help us to sort out an old rivalry among investment practitioners and writers. To put it simply, some assert that the crowd is always or generally wrong; these are called "contrarians." Others believe that the "trend is your friend." The implication of Surowiecki's work is that markets can do a sensational job of valuing securities. However, where those "watching the tape" exceed those valuing cash flows, look out! For then you have the conditions for poor group decision, excessive price momentum, and then extreme setback.

Surowiecki's discussion of stock market bubbles and the idea of "dependent" action relies partly on Robert Schiller's work in behavioral finance, particularly the notion of "feedback loops." However, it is notoriously difficult to predict when a bubble will burst, rather than expand more. I don't see how either author provides a theoretical or practical basis for timing the decision to sell short.

Surowiecki's slim book carries broad-ranging implications for informed action in politics, science, business and even sports. And although the work is not based on independent empirical research, it charts a path for further research. I recommend it highly.)

(The author of this review, Andrew Szabo, is founder of MindBodyForce.com)

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.

"Reinforced my belief in collective and collaborative thinking to make better decisions. Surowiecki says, "Wise crowds" need (1) diversity of opinion; (2) independence of members from one another; (3) decentralization; and (4) a good method for aggregating opinions. "If these four basic conditions are met, a crowd's "collective intelligence" will produce better results than a small group of experts". He demonstrates effectively, in diverse situations, how the collective wisdom of groups of people outweighs the wisdom of any of the participants in the group - even the judgments of the most educated and expert participants in these groups. The chapter on NASA's mismanagement of the Columbia mission and the tale of how a man named John Craven relied on collective wisdom to find a lost submarine are especially striking. Overall enlightening and good read for decision making."

I expected to hate this book but it confounded my expectations. It is a very interesting, provocative and stimulating. Even in the sections that I disagreed with there was enough interesting material to hold my attention, it was refreshing to need to question one's assumptions and to think about the points being made.

What is the Wisdom of Crowds? The book defines it rather loosely suggesting that groups make better decisions if certain conditions are met. The conditions are: diversity (to ensure that different information is used to make the decision), independence and (a certain type of) decentralisation (to ensure that no one person is dictating the decision and that people are using their own private information) together with a way of summarising the different opinions into a collective view.

This loose definition allows the book to address a huge range of topics. It does not build a coherent case attempting to support and justify the central thesis. Instead it relies on a more anecdotal approach - examining situations where crowds can be wiser and situations where they fail to be wise - it is a biography of an idea rather than a manifesto.

To provide some structure three different types of problem are identified: cognition problems, co-ordination problems and co-operation problems. However, even within these broad areas large and rather diverse sets of problems are examined; to help in the analysis a wide range to techniques are utilised including psychology, statistics and game theory. The book makes great play of the ideas being counterintuitive and surprising; in some of the examples this is true, in others it seems to be seriously stretching the point. For example, the story about finding the lost submarine is surprising, as is the speed with which the market identified the company at fault for the Space Shuttle disaster. Less surprising are the examples which boil down to applied game theory, statistics or the fundamental nature of markets.

The most important (practical) problem with the thesis is that the conditions required for the wisdom of crowds to apply are very difficult to meet. The book recognises this and devotes considerable space to situations where crowds fail to be wise because of this. For me, these are probably the best sections of the book. It is very clear that the wisdom of crowds does not mean management by committee (as committees almost always fail to meet the necessary conditions). It is also very sharp on the culture of the 'expert' and is very clear about the need for dissent and the importance of (intellectual) diversity. The section on NASA is chilling and excellent.

In spite of the issues this is still a fascinating book. There is a huge range of stories and examples about how the wisdom of crowds can work and how it can fail spectacularly. I found it a thoroughly engaging and interesting book.

Collective wisdom, with the right ingredients, can beat individual expertise and define leadership. This is a concept we have known since our ancestors first self-organized. It is only now becoming common wisdom as we all join in "on-line" to experience directly these challenging and paradoxical truths first put forward by small-r republican elites before us.

Surowiecki updates this theme in time for the front-end of our burgeoning Web Collective of prediction markets as well as collaboration and knowledge networks in an easy-to-digest format. Part 1 provides the basic, necessary ingredients for collective success: Diversity, Independence, Decentralization, and Coordination (Aggregation). Part 2 provides a somewhat down-to-earth and practical set of examples using the realms of science, committee decision-making and traffic patterns to set the stage for how our workplace and representative democracies will necessarily evolve to survive and thrive in this new open idea-market-based world.

These last case examples are not nearly in-depth enough to fully satisfy; they require much more than the space of a short chapter each and require tightening of the narrative to more clearly adhere to the key themes in Part 1 versus waxing on without rigor about the virtues of democracy and the market. Yet I was not expecting a tome. Rather, The Wisdom of Crowds is a relatively small pamphlet signaling a huge shift from one society to the next - and we're in it. And for that, it is well worth reading to hold up to the changes around us.

The Wisdom of Crowds is a well-written book describing the power of collective intuition. Who knew that the collected wisdom of random people in a room is more accurate than that of the most expert individual. The contrarian viewpoint of believing in the collective wisdom versus the advice of experts can re-frame the decision making process in many different situations as described in interesting detail in the book.

The interesting piece of the book is the use of real-world proof of collective decision-making. Surowiecki brings up several examples of the effectiveness of crowd wisdom including the stock market, betting spreads in football and candidate markets used to predict election outcomes. Haven't you always wondered how the betting line in Vegas is so accurate? You'll find your answer to this and many other confounding commonalities in this book. More intriguing is the brief introduction into using tools (such as markets) to leverage the power of collective wisdom in problem solving or forecasting. The books presents the quickly-crushed idea of using a market to predict terrorist targets and reviews the use a statistical method used by a Navy engineer to locate a lost sub during the Cold War.

I found the book to really pop, chapter to chapter for the first half of the book and then bog down and become a little less clear in the second half. This is likely not the fault of the author as the subject material in the second half of the book involves more complex scenarios, which introduce aspects of game theory and organizational dynamics. The ideas presented in this book are captivating, particularly in their potential for use in business and political scenarios. I believe that Surowiecki could make a living with seminars that teach how to implement methods to bring this powerful knowledge tool to corporate decision makers.

Surowiecki's basic thesis is that crowds, given certain ideal circumstances, can be much sharper than most of us give them credit for.

The book is engrossing and enlightening. Yet, though we are provided with a plethora of mind-boggling anecdotes, I remain suspicious of the viability of the author's fundamental thesis: despite his protestations to the contrary, he seems to be cherry-picking his examples.

There are plenty of instances where crowds have also been idiotic. Surowiecki readily admits this, but points out that certain circumstances must obtain (such as openness to new information) in order for crowds to have their uncanny shrewdness.

In practice, the problem is that in practice it's virtually impossible to tell whether a group truly is "open to new information" and its members can easily "communicate with one another." Groups typically believe they are; it is only in retrospect that historians and sociologists are able to ferret out that they really weren't.

In any event, about two months after having read the book, I find that I have taken away little from it, though I enjoyed reading it at the time.

One of those books that are memorable, like "The Signal and the Noise" by Nate Silver. The choice of the title proves the ad's victory over accuracy. Despite some gaps, Surowiecki's hypothesis defends itself; but only under certain constraints. Additional star for very good bibliography.

As a card-carrying member of the liberal elite, I approached James Surowiecki's book, The Wisdom of Crowds, with more than a small amount of skepticism. If his thesis, as exposed in the subtitle, "Why the Many Are Smarter than the Few and How Collective Wisdm Shapes Business, Economies, Societies, and Nations," was true, it would put all of my liberal beliefs about the importance of higher education and intelligence used by experts in the service of the greater good to a serious test. Would this book turn me from being an admirer of Al Gore into a Bush-head? The horror, the horror.

Now that I've finished the book, I'm happy to say that I'm still voting for John Kerry, but I do have a higher opinion of the ability of the masses to answer perplexing problems. At the same time, I strongly feel that Surowiecki's title and thesis are somewhat disingenious, owing more to a good marketing campaign and titular wordplay than actually expressing correctly the promise of his argument. Surowiecki attempts to deflate the classic book by Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds, and yet only mentions this famous counter argument by name twice and then only in passing. By doing so, he fails to fully address a real flaw in his thesis: when (under what conditions, size, background, etc) is a crowd a useful body as opposed to a dangerous mob.

That's not to say that Surowiecki fails to show how crowds can make smarter decisions that individual experts. Through anecdotes and discussion of controlled social experiments, he illustrates how, collectively, a group actually does much better at problem solving, mainly through the use of group error correction, i.e., while one or two members of the group might be off the answer by degrees of standard deviation, when averaging, the group as a whole comes much closer to the correct answer more often than an individual expert. In particular, his discussion of the way that markets work (in this case, not just the stock market, but Vegas betting lines as well as faux creations such as the Hollywood Stock Exchange) changed my opinion of the usefulness of these for decision-making purposes.

Yet it is also in this discussion of markets that Surowiecki's argument falls flat, in that he glosses over real market problems such as the irrationality of crowds in a bull market (such as the Danish tulip craze, the 1920s boom, or the irrational exuberance of the 90s) while making the case for how the proposed DARPA Policy Analysis Market ("a market centered on the Middle East [that] might provide intelligence that otherwise would be missed"). Surowiecki seems to me to be much more trusting of humans, whereas I'm much more inclined to believe that no matter how good a system might be, there's also that individual expert who's working on gaming the system, making it fail in ways unexpected. I only harp on this because I get the feeling in several cases (the DARPA chapter in particular, where Surowiecki's disdain for the congress people who killed the Policy Analysis Market is all too apparent) that he is championing the use of market-based decision making over our current expert-based.

Reading this book did make me look at situations differently, and because of such, I'd recommend it. For example, while watching the 2004 Summer Olympics, I instantly thought of this book while watching the reaction of the crowd who felt that the judges for the individual men's gymnastics high-bar competition had not graded the Russian gymnast's performance correctly. They proceeded to boo and make noise until the panel of six judges changed their ratings. I pondered, is this an example of Surowiecki's thesis or an example of mob-rule, or, perhaps something he didn't quite cover, a little of both?

The book's premise as outlined in the introduction is so wrong, and clearly so, that everything that follows doesn't make sense. This book would not be approved as a thesis in any respectable university. Starting with Jesus' crucifixion mobs have shown little wisdom. Surowiecki tells us that Gustave Le Bon got it backward but the ascent of Hitler in Germany proves him wrong. Hitler followed Le Bon's precepts and Germany was the most educated country in Europe. Groupthink in the Cuban crisis is another instance of groups getting it wrong. Populism in the developing democracies is another. In a certain sense, crowds are like individuals. We can be wrong and we can be right. It all depends on the circumstances, the background and the emotions at stake. Surowiecki's thesis is good for a New Yorker article but not good enough for a book. He writes well, that's why I give him 2 stars

The greatest lesson I learned in business school is summed up in the statement, "Teams tend to make better decisions than individuals," - I have seen this axiom reinforced repeatedly in a variety of areas of life and work. So, it wasn't surprising to me that journalist and author James Surowiecki wrote a book titled - "Wisdom of Crowds" - which is focused on the premise that given proper circumstances, groups make better decisions than the smartest individual member. As identified by the author, the specific conditions that best facilitate this phenomenon are crowds comprised of appropriately diverse individuals who are also decentralized and independent. He further asserts that more often than not, this collection of conditions allows for sound decisions. Soundview recommends this book because its insight regarding the decision making ability of groups can be harnessed to solve difficult problems while fostering societal cooperation and coordination. Few can dispute that our economy, government and day-to-day lives are impacted by "crowd power," and Surowiecki's book helps explain that when problems occur its usually due to an absence of intelligent crowd criteria. So get a second (third, fourth and fifth) opinion before making a critical decision.

This well-written bestseller explores the apparent anomaly that crowds of nonexperts seem to be collectively smarter than individual experts or even small groups of experts. This basic insight is at the heart of contemporary financial investment theory, with its emphasis on the difficulty of outguessing the market. Beginning with British scientist Francis Galton's remarkable discovery in 1906 that a crowd of nonexperts proved surprisingly competent at guessing the weight of an ox, financial columnist and author James Surowiecki skillfully recounts experiments, discoveries and anecdotes that demonstrate productive group thinking. The concept does not come as news to anyone reasonably well read in modern financial literature, but we recommend this comprehensive, fresh presentation.

This book could be criticized for lack of analytical rigor but on the other hand, it is a terrific introduction to some of the more fascinating aspects of statistics, economics and human behavior. As an astrologer and psychic, I have often commented to my clients, "You think what I do is a mystery? Economics is the biggest mystery of all!"

I found this book one of the few books this year that really changed the way I look at things and think about things.

For example, a recent immigrant from another country known to often pull my leg told me about cars being "automatically driven" down the highway here in San Diego a few years ago. I thought he was making it up. But it really happened. Surowiecki explains they were testing traffic patterns.

Surowiecki also cleared up a matter that had frustrated me -- the government's proposed futures market on terror attacks. I knew when I heard about it would work because I'm intuitive. But I never could have put it into words like Surowiecki did.

This is a great, fun, readable book that makes economics more clear to the average person and it changed the way I think about the world around me, so I give it a big FIVE STARS. Actually, I couldn't put it down!

Surowiecki's style is enjoyably casual, and his writting is much appreciated on a topic that might otherwise be rather impenetrable material. In short, he makes this is an enjoyable read.

Surowiecki argues that under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them. That's a summary of the book, as he claims large groups of people are smarter than an elite few. It's a view, which easily supports capitalism and democracy. And I believe that's because his overall premise and conclusions are correct.

I've been thinking of some potential counter-examples. For instance, why is it that the `blockbuster' films of summer are often some of the poorest pieces of entertainment? Additionally, I can understand a few people buying junk food, but why do the masses consume it? Furthermore, why do some of the worst politicians end up getting elected?

The thing Surowiecki seemingly leaves out is the importance of having a `good' populous. What I mean is, imagine a pirate ship filled with thieves and robbers who are `electing' a new captain. Isn't it most likely that their choice will reflect their values (or lack of them)? Isn't one essential ingredient for good choices that of a good means or standard by which to test options against in the decision making process?

The ideal of cooperation, or having to work together despite our self-interest, is a moral ideal. Likewise, mutual respect is not amoral. These are requirements in a productive and coordinated society. The question then becomes, how do individuals gain a right foundation allowing these essential, shared values? I wish Surowieki had addressed this. With that said, the book brings up a much needed discussion which will hopefully be carried into the public square.

I thought it was really informative, entertaining and very well written.

"It may be, in the end, that a good society is defined more by how people treat strangers than by how they treat those they know"

"The problem with the stock market is that there is never a point at which you can say that it's over, never a point at which you will definitively be proved right or wrong"

"Not all information is created equal"

"Groups are only smart when there is a balance between the information that everyone in the group shares and the information that each of the members of the group holds privately."

The Wisdom of Crowds makes the intriguing point that a group is quite often more accurate than an individual in decision making, even when that individual is an expert. Surowiecki uses examples from politics, business, and gambling, and sports to demonstrate that when groups have “diversity, independence, and a particular kind of decentralization,” they collectively have the knowledge and circumstances to make consistently good decisions.

Surowiecki clarifies that intelligence is still necessary, but when that intelligence resides in one person, options for problem solving are limited and crucial information may only be available to others.

Another point, Surowiecki is not saying that “groupthink” is good or that we should follow the crowd in spite of what we know to be true. He clarifies that independence and decentralization buffer these effects, thereby contributing to the widest possible pool of data to aggregate and even average for an accurate prediction/decision.

I enjoyed the book and I think it's going to help me win some money from my husband during football season.

I bought this book already sympathetic to its premise, because I had already known that you can learn a great deal from all people not just "experts" -- although you should by no means discount expert opionion. The author demonstrates how even equally qualified experts can have different equally well thought out opinions. Surowiecki's particular argument in favor of second (and third) expert opinions was so convincing that it gave me the motivation I needed to get my son's chronic, undiagnosed illness finally diagnosed by another doctor, even though my son's current doctor was excellent and well-qualified. My reason for loving this life changing book is quite personal.

I was very satisfied with The Wisdom of Crowds. Surowiecki's main hypothesis is that in many situations the answer a crowd arrives at can outperform that of the smartest individual in the group. He gives many interesting examples of this, and of the types of situations where the group doesn't perform well and why, breaking group interactions into three types: cognition, coordination, and cooperation.

Some of the topics included: the bubble booms of plank roads and bowling alleys, intelligence agencies and 9/11, restaurant tipping, television ratings, highway merging, SARS research, Linux, the Columbia explosion, corporate infrastructure, and the biggest most relevant group - democracy in the US.