Saturday, March 8, 2008

The Wisdom of Crowds by James Surowiecki - book review

The Wisdom of CrowdsThe Wisdom of Crowds by James Surowiecki. This book discusses the theory that a larger group of diverse people can make better decisions, and display more intelligence than any smaller collection of experts. Surowiecki's central concept is that the insights of a diverse group of individuals working independently can be aggregated together.

He contrasts this with the group dynamics/social psychology studies done by Stanley Milgram in previous decades, which looked at how large groups of people can be influenced by the actions of a few, causing information cascades, and "Tipping Point" effects. Suroweicki's concept avoids the "tipping point", and information cascade effects by employing a diverse group of individuals who work largely independently of one another.

Some examples of Crowd Wisdom that Surowiecki gives are:

  • Prediction Markets
  • Aggregating Insights of a Diverse Group of Individuals
  • Decentralization (like Open Source Software Development, for example)

The wisdom of crowds you say? As Surowiecki explains, yes, but only under the right conditions. In order for a crowd to be smart, he says it needs to satisfy four conditions:

1. Diversity. A group with many different points of view will make better decisions than one where everyone knows the same information. Think multi-disciplinary teams building Web sites...programmers, designers, biz dev, QA folks, end users, and copywriters all contributing to the process, each has a unique view of what the final product should be. Contrast that with, say, the President of the US and his Cabinet.

2. Independence. "People's opinions are not determined by those around them." AKA, avoiding the circular mill problem.

3. Decentralization. "Power does not fully reside in one central location, and many of the important decisions are made by individuals based on their own local and specific knowledge rather than by an omniscient or farseeing planner." The open source software development process is an example of effect decentralization in action.

4. Aggregation. You need some way of determining the group's answer from the individual responses of its members. The evils of design by committee are due in part to the lack of correct aggregation of information. A better way to harness a group for the purpose of designing something would be for the group's opinion to be aggregated by an individual who is skilled at incorporating differing viewpoints into a single shared vision and for everyone in the group to be aware of that process (good managers do this). Aggregation seems to be the most tricky of the four conditions to satisfy because there are so many different ways to aggregate opinion, not all of which are right for a given situation.

The Wisdom of Crowds and over 400000 other books are available for Amazon.

Ok, Chek-out and get the book on

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