The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations
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No one in this world, so far as I know, has ever lost money by underestimating the intelligence of the great masses of the plain people. H. L. Mencken
H. L. Mencken was wrong.
In this endlessly fascinating book, New Yorker columnist James Surowiecki explores a deceptively simple idea that has profound implications:large groups of people are smarter than an elite few, no matter how brilliantbetter at solving problems, fostering innovation, coming to wise decisions, even predicting the future.
This seemingly counterintuitive notion has endless and major ramifications for how businesses operate, how knowledge is advanced, how economies are (or should be) organized and how we live our daily lives. With seemingly boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, economic behaviorism, artificial intelligence, military history and political theory to show just how this principle operates in the real world.
Despite the sophistication of his arguments, Surowiecki presents them in a wonderfully entertaining manner. The examples he uses are all down-to-earth, surprising, and fun to ponder. Why is the line in which youre standing always the longest? Why is it that you can buy a screw anywhere in the world and it will fit a bolt bought ten-thousand miles away? Why is network television so awful? If you had to meet someone in Paris on a specific day but had no way of contacting them, when and where would you meet? Why are there traffic jams? Whats the best way to win money on a game show? Why, when you walk into a convenience store at 2:00 A.M. to buy a quart of orange juice, is it there waiting for you? What do Hollywood mafia movies have to teach us about why corporations exist?
The Wisdom of Crowds is a brilliant but accessible biography of an idea, one with important lessons for how we live our lives, select our leaders, conduct our business, and think about our world.
Rate Points :4.0
Binding :Hardcover
Label :Doubleday
Manufacturer :Doubleday
ProductGroup :Book
Studio :Doubleday
Publisher :Doubleday
EAN :9780385503860
Price :$24.95USD
Lowest Price :$5.96USD
Customer ReviewsImportant and Paradoxical Rating Point :5 Helpful Point :0 Surowieckis The Wisdom of Crowds documents and analyzes an extremely important phenomenon. When people guess at a question to which nearly no one knows the answer but most people can make a sensible guess (e.g., what proportion of the worlds airports are in the USA how many marbles can fit into a box that is a meter on each side) the average of a large group is nearly always more accurate than the guess of any member of that group. Moreover, the more people involved, the more accurate the average is.
This phenomenon was first discovered by Francis Galton, Charles Darwins first cousin. Throughout his life, Galton was obsessed with measurement and categorization. His study of fingerprints led to their use by the police to identify criminals. His study of twins revealed that biological heredity determines intelligence and temperament. He also worked out the coefficient of correlation, which is a basis of modern statistics. In 1906, when Galton was eighty-five and still as inquisitive as ever, he visited a country fair. One of the events was a contest to try to guess what the weight of an ox, which was on display, would be after it had been killed and dressed. In order to enter the contest, a person had to pay sixpence and write his guess, along with his name and address, on a piece of paper. After the contest was over, Galton borrowed the papers with the guesses. There were 787 papers in total. To his amazement, the average guess was only one pound less that the actual weight (1,198 pounds). That was closer than any individual guess. Yet, some of the participants in the contest were butchers and cattle raisers, who would be expected to do much better than the average.
This phenomenon also applies to predictions of future events. That is why it is nearly impossible to make money consistently by betting on sporting events - because the odds are determined by the average of all bets, which is extremely accurate. The most striking illustration of this phenomenon is the otherwise inexplicable fact that, with very few exceptions, professional stock investors (managers of mutual funds, pension funds, etc.) do worse than the stock market indexes. Professional investors are highly intelligent people, who devote all their time to analyzing stocks and stock market trends they have specially developed soft-ware and teams of assistants. But their analyses are not as accurate as the average analysis of all investors.
However, for the wisdom of crowds to work, two conditions must be met (pages 10-11, 36-7). One is that the opinions of the individuals involved must be formed and expressed independently of the others. When decisions are made by groups meeting together, the group is often swayed by a consensus that seems to have formed or by one or two of its member who seem to have more expertise, or who express their opinions forcefully. Also, the individuals involved must have some knowledge of what is involved. For example, the average prediction of Indonesian peasants as to which team will win the National Football League championship would be worthless.
In line with the second condition, the wisdom of crowds does not apply to areas of technical expertise. The average guess of a crowd as to the weight of an ox when it has been slaughtered and dressed is more accurate than the estimate of any butcher in the crowd. But the butchers in the crowd are more adept than any non-butchers at carving the ox, storing its meat, and preparing it for sale.
Surowiecki offers a general explanation (pages 10-11) for why the crowds are wiser than any of their individual members and specific reasons (pages 34, 44-50) for why professional stock investors do worse than the stock indexes. I found the latter explanations more convincing than the former.
Surowiecki also discusses (pages 236, 245-6) the obvious objection that the average prices of stocks, houses, and commodities often rise and fall sharply, without regard to the value of the assets involved. Such price swings do not occur with ordinary goods and services, such as televisions or haircuts nor does a rise in price of ordinary goods and services induce more people to buy them. Average predictions of the results of sporting events or of elections are also immune from irrational price bubbles. In these cases, the accuracy of the predictions is decided unequivocally at a specific time in the near future. That keeps the crowd tethered to reality. But when the prices of stocks, houses, and commodities rise, that means that they can be resold at a higher price and there is no point at which the bet is definitely over and the bettors have undeniably been proved right or wrong.
Inspired me to go to grad school Rating Point :5 Helpful Point :0 I read this book between my freshman and sophomore years as an undergrad at Carleton College. Now, years later, Im a PhD student studying Information, which is an interdisciplinary field created in part to examine the phenomena Surowiecki so brilliantly describes: disparate pieces of information held by ordinary people aggregating into miraculously accurate predictions. This idea is also at the core of modern economics, in which prices are understood as conveying critical information more efficiently than any central authority ever could.
This is not an academic book. Its an exciting, anecdote-rich treatise, as good as anything Surowieckis fellow New Yorker staff writer Malcolm Gladwell has ever put out. I would recommend this book to anyone.
Making Better Decisions by Tapping into the Crowd Rating Point :5 Helpful Point :1 Blogging, Twitter, Facebook, MySpace, and other social networks are the results of Web 2.0. But what do they mean? To many people they are the new noise on the internet. But there is something going on, under the current, that can change the corporations that recognize that they can leverage these networks. It may not even be apparent to those that are heavy users of these social networks. What you have, at a high level, are crowds of very diverse people coming together under the umbrella of social networks. James Surowiecki, author of The Wisdom of Crowds, has tapped into these networks, and more, to provide you with a very readable, enjoyable look at these emerging networks.
Contents: The Wisdom of Crowds The Difference Difference Makes: Waggle Dances, the Bay of Pigs, and the Value of Diversity Monkey See, Monkey Do: Imitation, Information Cascades, and Independence Putting the Pieces Together: The CIA, Linux, and the Art of Decentralization Shall We Dance?: Coordination in a Complex World Society Does Exist: Taxes, Tipping, Television, and Trust Traffic: What We Have Here Is a Failure to Communicate Science: Collaboration, Competition, and Reputation Committees, Juries, and Teams: The Columbia Disaster and How Small Groups Can Be Made to Work The Company: Meet the New Boss, Same as the Old Boss? Markets: Beauty Contests, Bowling Alleys, and Stock Prices Democracy: Dreams of a Common Good Acknowledgements Notes
Surowiecki begins the book with a look at an ox weighing competition from 1906. Francis Galton, believed that only a select few were capable of keeping societies healthy. Breeding mattered and the unwashed crowds did not have the mental capacity to make any decision of importance. After the ox weighing competition, Galton was provided with all the crowds guesses. He believed that the crowd would be off by a magnitude and that only one or two people would have guessed the correct weight. However, after tabulating the results, he found that the average guess was 1,197 pounds. The actual weight was 1,198 pounds. The crowds guess was perfect. This is at the heart of Surowieckis book There is a huge, intelligent crowd out there and you need to understand how to tap into it and use it. He examines all sorts of crowds traffic, the CIA and NASA, the stock market, and more. Each holds valuable lessons in using the wisdom of crowds which can be applied to many situations.
Social networks are an important result of Web 2.0. For many people, and corporations, they seem to simply be another example of the internet wasting peoples time. Surowiecki makes you sit up and recognize the value of these new methods of tapping into the crowd with this enjoyable, highly recommended book. While the internet makes connections easier, throughout history you see that visionaries use the crowd to predict election outcomes (and it isnt through polls), horse racing results, and more. Even using the wisdom of your employees, you can create better products, find new markets, and change the rules of competition. If you want to understand the value of social networks, how to leverage them, or how to truly empower your employees, this book is a "must read." Not only does Surowiecki help you use these networks, he also provides guidance on how to correct poor performing small groups.
Great book Rating Point :4 Helpful Point :0 This was a fantastic read. Take it on the train or to the beach. I read it while waiting in a jury pool (Theres actually a chapter concerning juries). Great balance between specific events and larger trends. Its similar in style to books like Freakonomics and The Tipping Point.
Some of the arguments are intriguing, but not all of them are convincing Rating Point :3 Helpful Point :0 Makes the argument that groups of people, apprropriately diversified and independent, can make better decisions than even the smartest individuals in the group most of the time, when their individual ideas, votes, or guesses are properly aggregated.
If it seems like Ive used too many qualifiers in summarizing the argument, so does the author in making the argument. Some of the arguments are intriguing, but not all of them are convincing, and in the second half of the book he spends more time discussing general examples without driving the arguments home.
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