The Wisdom of Crowds

The Wisdom of Crowds

by James Surowiecki

Better decisions lead to better results. But how do we make better decisions?

According to a new book, The Wisdom of Crowds by James Surowiecki, the key word is “we.” Better decisions often can be made by groups rather than individuals.

More particularly, Surowiecki compellingly argues that “under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.”

Case in point: You’ve watched Who Wants to Be a Millionaire. When the contestant asks the audience, the audience is almost always right. The “smart friends” who are just a phone call away? Not nearly as smart.

Take another case. At a county fair, 800 attendees attempted to guess the weight of a 1,198-pound ox. The average of all 800 guesses was 1,197 pounds. Apparently it was not a fluke.

Under what conditions is a crowd smarter than the smartest person in it? The key is diversity. It adds perspective and works against some of the destructive characteristics of group decision-making. The smaller the group, the more important diversity becomes because, in a small group, it is easy for a few biased individuals to skew the group’s decision-making.

And grouping “smart people” together, even if they are diverse, isn’t better. People we consider “smart” tend to be homogeneous in the way they think. Adding a few people who know less about the subject but have different skills actually improves the group’s performance. According to Surowiecki, “legendary organizational theorist” James G. March says, “The development of knowledge (within a group or organization) may depend on maintaining an influx of the naive and the ignorant. Competitive victory does not reliably go to the properly educated.”

Groups that are too much alike find it harder to keep learning. Nobody is questioning, pushing or introducing new information and perspective.

So, if this is the case, why do we cling so tightly to the idea of the expert? Why do we ignore the fact that simply averaging a group’s estimates will consistently produce a very good result? The answer may be that we incorrectly assume that averaging means dumbing down or compromising. We prefer to pick the expert, and we assume that true intelligence must reside in an individual.

I recommend reading The Wisdom of Crowds. It’s a fascinating book that contends that the key to our success may not be in becoming experts ourselves, or in hiring experts. (Think Enron, they hired the “best and brightest” from top schools.) Instead, it may be in our ability to unlock and trust the collective wisdom of whatever team that happens to be assembled (think Bad News Bears).