Review of The Wisdom of Crowds by James Surowiecki

The Wisdom of CrowdsOne of the big trends in the tech and business communities for the past couple of years has been to begin to rethink sociological phenomenon. This is due to the great advances in communication technology in the past few years. During the Internet boom, the business and high tech communities were mostly focused on the emerging technologies such as distributed computing. The business interest in technology is focusing less on Moore’s Law and moving more towards the sociological and organizational impacts of technology. While academia has been focused on this for much longer, business books like this one have recently been gaining momentum.

The Wisdom of Crowds offers a nice introduction to relevant concepts in sociology and game theory and discusses them from a business perspective. While there may not be a whole lot of new information for readers already familiar with these topics, Surowiecki’s easy writing style is enjoyable and will appeal to a broad range of business decision makers.

One of the most beneficial new ideas to come out of this book is the addition of a fourth class of individuals affecting social epidemics, as described in Malcolm Gladwell’s book The Tipping Point: How Little Things Can Make a Big Difference. Gladwell identified the Salesman, Maven, and Connector as classes of individuals who start epidemics. Surowiecki identifies a class of individuals who can potentially disrupt an epidemic by merely by offering an independent voice. He doesn’t give a name to this class of individuals, but they could perhaps accurately be called Disruptors.

The title, derived from an influential nineteenth century book on large group dynamics called Extraordinary Popular Delusions & the Madness of Crowds by Charles Mackay, is a bit of a misnomer since the “crowds” to which Surowiecki refers can be defined as groups of individual agents working in an independent and more or less isolated fashion. Crowds, by contrast, are large groups that are acutely aware of each other’s presence and highly reactive, thus forming something of a single organism. The author’s foundational assumption, then, is that individuals can, under the right circumstances, express an individual agency that is not determined by crowd dynamics, in Mackay’s sense.

From an academic perspective, the populist crowd wisdom presented in The Wisdom of Crowds seems to be an extension, or perhaps an evolution, of the Hegelian concept of “thesis-antithesis-synthesis”, where the conclusion drawn from the reconciliation of two contradictory thoughts becomes a higher thought that transcends both original thoughts. While Surowiecki does not provide concise logical arguments concerning the notions of realism or social determinism, he does provide several pragmatic examples to back up his assumptions.

Surowiecki does a nice job of discussing effective management of these groups of individuals by creating a dichotomy of centralization versus aggregation. Centralization, according to Surowiecki, can either lose the benefits of collective wisdom by relying on a limited point of view, or worse, can actually destroy collective wisdom in groups through authoritarianism.

There is and important aspect of effective individual collectives that Surowiecki fails to fully explore. In each of Surowiecki’s examples, each group shares a common social context. Collective “wisdom”, by Surowiecki’s definition, can be described as merely a reflection of the prejudices and shared social reality of a collection of individuals (by social reality, I am referring to the idea that the way we view the world is highly dependent on the culture around us).

Diversity, for the author, is central to the effectiveness of collective wisdom. This wisdom, however, is dependent on a relevant social context, thus requiring a certain amount of homogeneity within the group. The author acknowledges this only one time in the book, when discussing Schelling points:

“…The existence of Schelling points suggests that people’s experiences of the world are often surprisingly similar, which makes successful coordination easier. After all, it would not be possible for two people to meet at Grand Central Station unless Grand Central represented roughly the same thing to both of them… The reality Schelling’s students shared was, of course, cultural. If you put pairs of people from Manchuria down in the middle of New York City and told them to meet each other, it’s unlikely any of them would manage to meet. But that fact that the shared reality is cultural makes it no less real. (p. 92)”

While diversity is important to collective wisdom, it only makes sense within certain parameters. For instance, the NASA Challenger discussions did lack a diversity of individual contributions, but that diversity was only relevant within a certain context. NASA’s findings would not have been the better for taking a random poll of non-NASA employees. The collective wisdom in this case only made sense within the context of highly specialized engineers. What we must now consider is the amount of diversity required to produce a “wise” result. While Surowiecki is quick to point out that the lack of diversity of perspective can be detrimental to collective wisdom, the over-abundance of diversity can result in arbitrary or faulty data.

Of course, now the discussion revolves around what is meant by the terms “wisdom” and “diversity”. Different situations require different kinds of solutions and different levels of diversity. This is an area that would be very beneficial to explore, especially in the context of the Web (the impact and usage of folksonomy, for instance). Unfortunately, Surowiecki offers very little discussion on these points. Surowiecki does allude several times to the fact that individuals likely to be involved in a particular collective have an adequate incentive to participate. While Surowiecki does not explicitly point this out, he assumes, probably fairly correctly, that people likely to participate in something like a financial or information market have placed enough investment (time, reputation, money, etc.) in that market that they will have a strong desire to attempt informed judgments; these investments should, according to Surowiecki, be enough to raise the bar of entry enough to create a system of self-filtration.

Pragmatically, Surowiecki has provided enough examples to create a workable hypothesis that business leaders and policy makers can use. As business books go, The Wisdom of Crowds is an intelligent and interesting read, well suited to a broad audience of business professionals.