Title: The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economics, Societies and Nations
 
Author: James Surowiecki

Backstory:
James Surowiecki writes about business and economics for the New Yorker, where the first published sections of The Wisdom of Crowds appeared. His idea—that groups consistently make better decisions than single individuals do—struck a collective cultural nerve, and the book became a bestseller. But he wasn’t the first New Yorker  writer to find such success. In 2000, fellow staff writer Malcolm Gladwell published The Tipping Point, the popularity of which paved the way for other general-interest economics books, including Freakonomics, by Steven D. Levitt and Stephen J. Dubner.
 
Total reading time: 600 minutes
 
First published: 2004

Key passages:
“If, years hence, people remember anything about the TV game show Who Wants to Be a Millionaire?, they will probably remember the contestants’ panicked phone calls to friends and relatives. Or they may have a faint memory of that short-lived moment when Regis Philbin became a fashion icon for his willingness to wear a dark-blue tie with a dark-blue shirt. What people probably won’t remember is that every week Who Wants to Be a Millionaire? pitted group intelligence against individual intelligence, and that every week, group intelligence won.”

“The wisdom of crowds has a far more important and beneficial impact on our everyday lives than we recognize, and its implications for the future are immense. But in the present, many groups struggle to make even mediocre decisions, while others wreak havoc with their bad judgment. Groups work well under certain circumstances, and less well under others. Groups generally need rules to maintain order and coherence, and when they’re missing or malfunctioning, the result is trouble.”

“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, it 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.”

Synopsis:
In The Wisdom of Crowds, Surowiecki throws one heck of a counterintuitive punch: Large groups, he says, are always smarter than a few so-called experts. That premise has profound implications for the corporate world, which patterns its decision-making processes on the hierarchical command-and-control military model and all too often concentrates authority at the very top. “The strategic decisions that corporations have to make are of mind-numbing complexity,” he writes. “But we know that the more power you give a single individual in the face of complexity and uncertainty, the more likely it is that bad decisions will be made.”

But The Wisdom of Crowds is more than just a business book; it’s a general lesson demonstrating that “under the right circumstances, groups are remarkably intelligent and are often smarter than the smartest people in them.” To illustrate this, Surowiecki uses a variety of fascinating examples that show how the collective wisdom of diverse groups can trump that of the most credentialed expert. He cites the once popular game show Who Wants to Be a Millionaire? as a case study, pointing out that contestants who polled the crowd rather than consulting an expert more often ended up with the right answer. He also recounts the story of how the U.S. submarine Scorpion was found in 1968 after the theories of some mathematicians and ocean-salvage experts were combined to make a map of sorts. Individually, these experts’ predictions about the doomed sub’s location were inaccurate, but taken as a whole, they were off by a mere 220 yards. “While trusting the collective judgment of a group may be difficult,” he writes, “it is also smart.”

Obviously, not all crowds are equal. Surowiecki suggests four key lessons for measuring the usefulness of the power of crowds: The people that compose it must have different backgrounds to diversify the knowledge at their disposal. Group members also need to be independent of one another, undistracted by peers. The group should be decentralized, with no central authority that could bias the group. Finally, there needs to be a way of boiling the crowd’s opinions down into one collective verdict.

Despite Surowiecki’s copious examples, some may remain unconvinced that a mob mentality can be a good thing. “We’re more likely to believe what Tommy Lee Jones’ character said in Men in Black: ‘A person is smart. People are dumb,’ ” Surowiecki writes. Still, he urges us to remember that “The Wisdom of Crowds is not an argument against experts, but against our excessive faith in the single individual decision maker.”