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The Wisdom of Crowds

Is a crowd's "collective intelligence" able to produce better outcomes than a small group of experts?

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, Author

Random House, New York 2004
607 p., ISBN 0-375-43362-7

Reviewed by Chloé Lachauer, M.A.
Translated by Angelika Stieglbauer

09.12.2004 · Reviewed by Chloé Lachauer

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How do we live together? How can living together work to our mutual benefit?

James Surowiecki's "The Wisdom of Crowds", subtitled "Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations", describes the phenomenon that a crowd's "collective intelligence" is able to produce better outcomes than a small group of experts.

"Ask a hundred people to answer a question or solve a problem, and the average answer will often be at least as good as the answer of the smartest member" (p. 19). This thesis Surowiecki makes clear on an outstanding experience the British Scientist Francis Galton had made in 1884. At the International Exhibition in London he came across a weight-judging competition. An ox had been selected and placed on display, and members of a gathering crowd were lining up to place wagers on the weight of the ox. Eight hundred people tried their luck. They were a diverse lot; many non-experts and experts competed. In the end the crowd had guessed that the ox would weigh 1,197 pounds; it actually weighed 1,198 pounds. In other words, the crowd´s judgement was essentially perfect. The analogy to a democracy, in which people of radically different abilities and interests each get one vote, had suggested itself to Galton immediately: "The average competitor was probably as well fitted for making a just estimate of the dressed weight of the ox, as an average voter is of judging the merits of most political issues on which he votes (p. XIV), he wrote.

In description of collective intelligence Surowiecki's book concentrates on three kinds of problems. The first are what he calls "cognition problems", the second "coordination problems" and the final kind a "cooperation problem" (p. XXIVf.). The conditions that are necessary for the crowd to be wise are diversity, independence, and a particular kind of decentralization.

Surowiecki first focuses on diversity as an important part of his theory: "Homogeneous groups are great at doing what they do well, but they become progressively less able to investigate alternatives. [...] Bringing new members into the organization, even if they're less experienced and less capable, actually makes the group smarter simply because what little the new members do know is not redundant with what everyone else knows" (p. 59) and: "The larger the group, the more reliable its judgement will be" (p. 67). Diversity "makes it easier for a group to make decisions based on facts, rather than on influence, authority, or group allegiance" (p. 70).

The second item which is remarkable for a wise crowd, is the independence which is important to intelligent decision making for two reasons. "First, it keeps the mistakes that people make from becoming correlated. Errors in individual judgement won't wreck the group's collective judgement as long as those errors aren't systematically pointing in the same direction" (p. 79f.).

Third, in terms of decision making and problem solving, there are a couple of things about decentralization that matter: "Decentralization's great strength is that it encourages independence and specialization on the one hand while still allowing people to coordinate their activities and solve difficult problems on the other" (p. 139). The problem, that it is "hard to make real decentralization work, and hard to keep it going, and easy for decentralization to become disorganization" (p. 147), is made clear by Surowiecki with an example of 9/11. When it comes to the problems of the U.S. intelligence community before September 11, "the problem was not decentralization. The problem was the kind of decentralization that the intelligence community was practicing. [...] What was missing in the intelligence community, was any real means of aggregating not just information but also judgements. In other words, there was no mechanism to tap into the collective wisdom of National Security Agency nerds, CIA spooks, and FBI agents. There was decentralization but no aggregation, and therefore no organization" (p. 151f.). The thesis of "The Wisdom of Crowds" says – leading to a "wise crowd" in the end – that the main key to successful group decisions is getting people to pay much less attention to what everyone else is saying.

The first half of the book is theory, although given relief to with practical examples, the second part of the book consists of what are essentially case studies focusing 9/11, the US-elections of 2004, the CIA, Stock Exchange, the Bay of Pigs and even more. Based on this enrichment of Surowiecki's theory of social politics, it becomes readable even for outstanding non-experts. Exciting and gripping as a crime story "revolutionary look at the way the world works" (Publisher´s Weekly) is to be read.

Pointing out numerous examples like London's traffic jam, the WHO and SARS or Science itself, Surowickie's thesis becomes clear, how small groups can be made to work: "If an organization sets up teams and then uses them for purely advisory purposes, it loses the true advantage that a team has: namely, collective wisdom" (p. 372): "The only reason to organize thousands of people to work in a company is that together they can be more productive and more intelligent than they would be apart" (p. 399). Surowieckis's volume opens up a new and very astonishing view on society now and in the future. The reflection and discussion on the case studies helps to make the less monotonous and well readable and understandable also for the reader who is unconnected with this subject.

That forward-looking new book comes to the conclusion that 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" (p. XXVI). And – going back to the questions brought up in the beginning, one can say that "The decisions that democracies make may not demonstrate the wisdom of the crowd. The decision to make them democratically does" (p. 531).