Book Review: The Wisdom of Crowds by James Surowiecki

The Wisdom of Crowds (2004) by James Surowiecki challenges the notion that experts know the best answer to everything. Instead, large groups of people often can come closer to the correct answers in problems whether it be the average guess of the weight of a pig, or the location of a wrecked submarine in the ocean. Surowiecki applies his theory through a series of entertaining anecdotes related to law, elections, intelligence, gambling, traffic, scientific collaboration, small groups, corporations, markets, and democracy.

The author breaks down three types of crowd knowledge: cognition, coordination and cooperation. He also finds four keys required for crowds to be wise: diversity of opinion, independence, decentralization, and aggregation. The lack of aggregation in particular is often the reason why crowd knowledge is seen as lacking by some and furthering a move toward centralization, such as the inability of US intelligence agencies to stop terrorist attacks on American soil (because they had not aggregated knowledge from diverse sources).

Surowiecki is particularly fond of free markets, and illustrates their advantages in way that can be convincing to a left-leaning “anticapitalist” like myself. Particularly interesting is the Iowa Electronic Markets which have been highly accurate in predicting everything from Presidential elections to Academy Awards because the participants are betting on outcomes not selecting preferences.

It was a very interesting book and interesting follow-up to reading Emergence: The Connected Lives of Ants, Brains, Cities, and Software and Sync: The Emerging Science of Spontaneous Order. Of course, I can’t read a book without learning about other books and these books mentioned in the text look interesting:

  • William H. White, City
  • Capitalism, Democracy, and Ralph’s Pretty Good Grocery by John E. Mueller

Favorite Passages

Diversity and independence are important because the best collective decisions are the product of disagreement and contest, not consensus or compromise. An intelligent group, especially when confronted with cognition problems, does not ask its members to modify their positions in order to let the group reach a decision everyone can be happy with. Instead, if figures out how to use mechanisms — like market prices, or intelligent voting systems — to aggregate and produce collective judgments that represent not what any one person in the group thinks but rather, in some sense, what they all think. Paradoxically, the best way for a group to be smart is for each person in it to think and act as independently as possible. – p. xix

What [Henry] Oldenburg grasped was the peculiar character of knowledge, which does not, unlike other commodities, get used up as it is consumed and which can be therefore spread widely without losing its value. If anything, in fact, the more a piece of knowledge becomes available, the more valuable it potentially becomes, because of the wider array of possible uses for it. – p. 166-67

Author : Surowiecki, James, 1967-
Title : The wisdom of crowds : why the many are smarter than the few and how collective wisdom shapes business, economies, societies, and nations / James Surowiecki.
Edition : 1st ed.
Published : New York : Doubleday : 2004.