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The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations Hardcover – May 25, 2004

by James Surowiecki (Author)

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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 brilliant—better 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 you’re 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? What’s 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.

From Publishers Weekly

While our culture generally trusts experts and distrusts the wisdom of the masses, New Yorker business columnist Surowiecki argues that "under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them." To support this almost counterintuitive proposition, Surowiecki explores problems involving cognition (we're all trying to identify a correct answer), coordination (we need to synchronize our individual activities with others) and cooperation (we have to act together despite our self-interest). His rubric, then, covers a range of problems, including driving in traffic, competing on TV game shows, maximizing stock market performance, voting for political candidates, navigating busy sidewalks, tracking SARS and designing Internet search engines like Google. If four basic conditions are met, a crowd's "collective intelligence" will produce better outcomes than a small group of experts, Surowiecki says, even if members of the crowd don't know all the facts or choose, individually, to act irrationally. "Wise crowds" need (1) diversity of opinion; (2) independence of members from one another; (3) decentralization; and (4) a good method for aggregating opinions. The diversity brings in different information; independence keeps people from being swayed by a single opinion leader; people's errors balance each other out; and including all opinions guarantees that the results are "smarter" than if a single expert had been in charge. Surowiecki's style is pleasantly informal, a tactical disguise for what might otherwise be rather dense material. He offers a great introduction to applied behavioral economics and game theory.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From Bookmarks Magazine

Surowiecki first developed his ideas for Wisdom of Crowds in his “Financial Page” column of The New Yorker. Many critics found his premise to be an interesting twist on the long held notion that Americans generally question the masses and eschew groupthink. “A socialist might draw some optimistic conclusions from all of this,” wrote The New York Times. “But Surowiecki’s framework is decidedly capitalist.” Some reviewers felt that the academic language and business speak decreased the impact of the argument. Still, it’s a thought-provoking, timely book: the TV studio audience of Who Wants to Be a Millionaire guesses correctly 91 percent of the time, compared to “experts” who guess only 65 percent correctly. Keep up the good work, comrades.

Review

What the crowd is saying about The Wisdom of Crowds:

“The Wisdom of Crowds is dazzling. It is one of those books that will turn your world upside down. It’s an adventure story, a manifesto, and the most brilliant book on business, society, and everyday life that I’ve read in years.”
—Malcolm Gladwell, author of The Tipping Point

"Most crowds of readers would agree that Jim Surowiecki is one of the most interesting journalists working today. Now he has written a book that will exceed even their expectations. Anyone open to rethinking their most basic assumptions--people who enjoyed The Tipping Point, say--will love this book."
--Michael Lewis, author of Moneyball.

“This book should be in every thinking businessperson’s library. Without exception. At a time when corporate leaders have shown they’re not always deserving of our trust, James Surowiecki has brilliantly revealed that we can trust each other. That we count. That our collective effort is far more important than the lofty predictions of those CEO-kings we have worshipped for too long.”
—Po Bronson, author of What Should I Do With My Life?

“Jim Surowiecki has done the near impossible. He’s taken what in other hands would be a dense and difficult subject and given us a book that is engaging, surprising, and utterly persuasive. The Wisdom of Crowds will change the way you think about markets, economics, and a large swatch of everyday life.”
—Joe Nocera, editorial director of Fortune magazine and author of A Piece of the Action.

“It has become increasingly recognized that the average opinions of groups is frequently more accurate than most individuals in the group. As a special case, economists have spoken of the role of markets in assembling dispersed information. The author has written a most interesting survey of the many studies in this area and discussed the limits as well as the achievements of self-organization.”
—Kenneth Arrow, winner of the Nobel Prize in Economics and Professor of Economics (Emeritus), Stanford University

From the Inside Flap

?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 brilliant?better 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 you?re 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? What?s 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.

About the Author

SUROWIECKI is a staff writer at The New Yorker, where he writes the popular business column, “The Financial Page.” His work has appeared in a wide range of publications, including the New York Times, the Wall Street Journal, Artforum, Wired, and Slate. He lives in Brooklyn, New York.

Excerpt. © Reprinted by permission. All rights reserved.

The Wisdom of Crowds

I

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.

Who Wants to Be a Millionaire? was a simple show in terms of structure: a contestant was asked multiple-choice questions, which got successively more difficult, and if she answered fifteen questions in a row correctly, she walked away with $1 million. The show's gimmick was that if a contestant got stumped by a question, she could pursue three avenues of assistance. First, she could have two of the four multiple-choice answers removed (so she'd have at least a fifty-fifty shot at the right response). Second, she could place a call to a friend or relative, a person whom, before the show, she had singled out as one of the smartest people she knew, and ask him or her for the answer. And third, she could poll the studio audience, which would immediately cast its votes by computer. Everything we think we know about intelligence suggests that the smart individual would offer the most help. And, in fact, the "experts" did okay, offering the right answer--under pressure--almost 65 percent of the time. But they paled in comparison to the audiences. Those random crowds of people with nothing better to do on a weekday afternoon than sit in a TV studio picked the right answer 91 percent of the time.

Now, the results of Who Wants to Be a Millionaire? would never stand up to scientific scrutiny. We don't know how smart the experts were, so we don't know how impressive outperforming them was. And since the experts and the audiences didn't always answer the same questions, it's possible, though not likely, that the audiences were asked easier questions. Even so, it's hard to resist the thought that the success of the Millionaire audience was a modern example of the same phenomenon that Francis Galton caught a glimpse of a century ago.

As it happens, the possibilities of group intelligence, at least when it came to judging questions of fact, were demonstrated by a host of experiments conducted by American sociologists and psychologists between 1920 and the mid-1950s, the heyday of research into group dynamics. Although in general, as we'll see, the bigger the crowd the better, the groups in most of these early

experiments--which for some reason remained relatively unknown outside of academia--were relatively small. Yet they nonetheless performed very well. The Columbia sociologist Hazel Knight kicked things off with a series of studies in the early 1920s, the first of which had the virtue of simplicity. In that study Knight asked the students in her class to estimate the room's temperature, and then took a simple average of the estimates. The group guessed 72.4 degrees, while the actual temperature was 72 degrees. This was not, to be sure, the most auspicious beginning, since classroom temperatures are so stable that it's hard to imagine a class's estimate being too far off base. But in the years that followed, far more convincing evidence emerged, as students and soldiers across America were subjected to a barrage of puzzles, intelligence tests, and word games. The sociologist Kate H. Gordon asked two hundred students to rank items by weight, and found that the group's "estimate" was 94 percent accurate, which was better than all but five of the individual guesses. In another experiment students were asked to look at ten piles of buckshot--each a slightly different size than the rest--that had been glued to a piece of white cardboard, and rank them by size. This time, the group's guess was 94.5 percent accurate. A classic demonstration of group intelligence is the jelly-beans-in-the-jar experiment, in which invariably the group's estimate is superior to the vast majority of the individual guesses. When finance professor Jack Treynor ran the experiment in his class with a jar that held 850 beans, the group estimate was 871. Only one of the fifty-six people in the class made a better guess.

There are two lessons to draw from these experiments. First, in most of them the members of the group were not talking to each other or working on a problem together. They were making individual guesses, which were aggregated and then averaged. This is exactly what Galton did, and it is likely to produce excellent results. (In a later chapter, we'll see how having members interact changes things, sometimes for the better, sometimes for the worse.) Second, the group's guess will not be better than that of every single person in the group each time. In many (perhaps most) cases, there will be a few people who do better than the group. This is, in some sense, a good thing, since especially in situations where there is an incentive for doing well (like, say, the stock market) it gives people reason to keep participating. But there is no evidence in these studies that certain people consistently outperform the group. In other words, if you run ten different jelly-bean-counting experiments, it's likely that each time one or two students will outperform the group. But they will not be the same students each time. Over the ten experiments, the group's performance will almost certainly be the best possible. The simplest way to get reliably good answers is just to ask the group each time.

A similarly blunt approach also seems to work when wrestling with other kinds of problems. The theoretical physicist Norman L. Johnson has demonstrated this using computer simulations of individual "agents" making their way through a maze. Johnson, who does his work at the Los Alamos National Laboratory, was interested in understanding how groups might be able to solve problems that individuals on their own found difficult. So he built a maze--one that could be navigated via many different paths, some shorter, and some longer--and sent a group of agents into the maze one by one. The first time through, they just wandered around, the way you would if you were looking for a particular cafe* in a city where you'd never been before. Whenever they came to a turning point--what Johnson called a "node"--they would randomly choose to go right or left. Therefore some people found their way, by chance, to the exit quickly, others more slowly. Then Johnson sent the agents back into the maze, but this time he allowed them to use the information they'd learned on their first trip, as if they'd dropped bread crumbs behind them the first time around. Johnson wanted to know how well his agents would use their new information. Predictably enough, they used it well, and were much smarter the second time through. The average agent took 34.3 steps to find the exit the first time, and just 12.8 steps to find it the second.

The key to the experiment, though, was this: Johnson took the results of all the trips through the maze and used them to calculate what he called the group's "collective solution." He figured out what a majority of the group did at each node of the maze, and then plotted a path through the maze based on the majority's decisions. (If more people turned left than right at a given node, that was the direction he assumed the group took. Tie votes were broken randomly.) The group's path was just nine steps long, which was not only shorter than the path of the average individual (12.8 steps), but as short as the path that even the smartest individual had been able to come up with. It was also as good an answer as you could find. There was no way to get through the maze in fewer than nine steps, so the group had discovered the optimal solution. The obvious question that follows, though, is: The judgment of crowds may be good in laboratory settings and classrooms, but what happens in the real world?

II

At 11:38 am on January 28, 1986, the space shuttle Challenger lifted off from its launch pad at Cape Canaveral. Seventy-four seconds later, it was ten miles high and rising. Then it blew up. The launch was televised, so news of the accident spread quickly. Eight minutes after the explosion, the first story hit the Dow Jones News Wire.

The stock market did not pause to mourn. Within minutes, investors started dumping the stocks of the four major contractors who had participated in the Challenger launch: Rockwell International, which built the shuttle and its main engines; Lockheed, which managed ground support; Martin Marietta, which manufactured the ship's external fuel tank; and Morton Thiokol, which built the solid-fuel booster rocket. Twenty-one minutes after the explosion, Lockheed's stock was down 5 percent, Martin Marietta's was down 3 percent, and Rockwell was down 6 percent.

Morton Thiokol's stock was hit hardest of all. As the finance professors Michael T. Maloney and J. Harold Mulherin report in their fascinating study of the market's reaction to the Challenger disaster, so many investors were trying to sell Thiokol stock and so few people were interested in buying it that a trading halt was called almost immediately. When the stock started trading again, almost an hour after the explosion, it was down 6 percent. By the end of the day, its decline had almost doubled, so that at market close, Thiokol's stock was down nearly 12 percent. By contrast, the stocks of the three other firms started to creep back up, and by the end of the day their value had fallen only around 3 percent.

What this means is that the stock market had, almost immediately, labeled Morton Thiokol as the company that was responsible for the Challenger disaster. The stock market is, at least in theory, a machine for calculating the present value of all ...

Print length

297 pages
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English
Publisher

Doubleday
Publication date

May 25, 2004
Dimensions

5.75 x 1 x 8.25 inches
ISBN-10

0385503865
ISBN-13

978-0385503860
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Publisher ‏ : ‎ Doubleday; First Edition (May 25, 2004)
Language ‏ : ‎ English
Hardcover ‏ : ‎ 297 pages
ISBN-10 ‏ : ‎ 0385503865
ISBN-13 ‏ : ‎ 978-0385503860
Item Weight ‏ : ‎ 1.05 pounds
Dimensions ‏ : ‎ 5.75 x 1 x 8.25 inches

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SUROWIECKI is a staff writer at The New Yorker, where he writes the popular business column, 'The Financial Page.' His work has appeared in a wide range of publications, including the New York Times, the Wall Street Journal, Artforum, Wired, and Slate. He lives in Brooklyn, New York.

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Daniel Benor, MD

a wonderful spectrum of examples of how collective consciousness is superior to individual contributions to that consciousness

Reviewed in the United States on April 10, 2009

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This is a very important book. James Surowiecki presents a wonderful spectrum of examples of how collective consciousness is superior to individual contributions to that consciousness.

In the simplest example, Francis Galton, a British scientist, attended a country fair. He was curious in a weight-guessing contest to see how close the average of all guesses came in assessing the weight of an ox after it had been slaughtered and dressed. The meat was the prize for the closest estimate. He expected that the average of the 787 legible submissions would be considerably off the mark, because many people with no expertise whatsoever were participating in the hopes of winning.

"Many non-experts competed," Galton wrote... in the scientific journal Nature, "like clerks and others who have no expert knowledge of horses, but who bet on races, guided by newspapers, friends, and their own fancies." 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," he wrote. (p. xii)

The average of all guesses was 1,197 pounds and the ox weighed 1,198 pounds.

Surowiecki notes that many have expressed serious skepticism about the wisdom of groups of people. Notable among these have been Charles Mackay, a Scottish journalist, who wrote about the madness of crowds in 1841; Bernard Baruch, an early 20th century speculator; Henry David Thoreau; and Friedrich Nietsche. Surowiecki acknowledges that there are situations in which crowds demonstrate execrably poor wisdom, as in the crowds who egg on people to jump when poised for suicidal leaps to their death.

Countering the skeptics and the dictates of simple logic as stated by Galton, Surowiedki, with a marvelous gift of pattern recognition, expands upon his original example, considering the wisdom of crowds in addressing various types of problems. He demonstrates repeatedly, in diverse situations, how the collective wisdom of groups of people outweighs the wisdom of any of the participants in the group - even the judgments of the most educated and expert participants in these groups.

A lovely example is that of the US submarine Scorpion, which disappeared in the Atlantic with no known cause.

... Although the navy knew the sub's last reported location, it had no idea what had happened to the Scorpion, and only the vaguest sense of how far it might have traveled after it had last made radio contact. As a result, the area where the navy began searching for the Scorpion was a circle twenty miles wide and many thousands of feet deep. You could not imagine a more hopeless task. The only possible solution, one might have thought, was to track down three or four top experts on submarines and ocean currents, ask them where they thought the Scorpion was, and search there. But as Sherry Sontag and Christopher Drew recount in their book, Blind Man's Bluff, a naval officer named John Craven had a different plan.

First, Craven concocted a series of scenarios - alternative explanations for what might have happened to the Scorpion. Then he assembled a team of men with a wide range of knowledge, including mathermaticians, submarine specialists, and salvage men. Instead of asking them to consult with each other to come up with an answer, he asked each of them to offer his bst guess about how likely each of the scenarios was. To keep things interesting, the guesses were in the form of wagers, with bottles of Chivas Regal as prizes. And so Craven's men bet on why the submarine ran into trouble, on its speed as it headed to the ocean bottom, on the steepness of its descent, and so forth.

Needless to say, no one of these pieces of information could tell Craven where the Scorpion was. But Craven believed that if he put all the answers together, building a composite picture of how the Scorpion died, he'd end up with a pretty good idea of where it was. And that's exactly what he did. He took all the guesses, and used a formula called Bayes's theorem to estimate the Scorpion's final location. (Bayes's theorem is a way of calculating how new information about an event changes your preexisting expectations of how likely the event was.) when he was done, Craven had what was, roughly speaking, the group's collective estimate of where the submarine was.

The location that Craven came up with ws not a spot that any individual member of the group had picked... The final estimate was a genuinely collective judgment that the group as a whole had made, as opposed to representing the individual judgment of the smartest people in it. it was also a genuinely brilliant judgment. Five months after the Scorpion disappeared, a navy ship found it. It was 220 years from where Craven's group had said it would be.
(pp. xx-xxi)

Cognition problems
Surowiedki examines the unusual situation of the TV show, Who wants to be a millionaire? Contestants could walk away with a million dollars if they correctly answered 15 successive multiple-choice questions of increasing difficulty. Contestants could call upon a trusted outside advisor or on the TV audience (who responded by computerized votes). We might guess that logic would suggest that the smartest person contestants could pick ought to score better than the random collection of people sitting in a TV studio on a weekday afternoon. Well, guess again. The experts answered correctly 65 percent of the time, while the audience was 91 percent on target.

Surowiedki reviews many research studies of guesses similar to Galton's original situation, such as estimating beans in a jar or ranks of items by weight. Invariably, the average of group guesses is closer to the actual number than the vast majority of individual guesses. In another example, gamblers' betting odds show that the public is extremely savvy, and those who set the odds are likewise very astute at guessing outcomes of events.

What is even more fascinating is that a diverse group that includes experts and non-experts in fields relevant to a problem being addressed will usually do better than a group composed only of experts in the relevant field.

He then expands to consider votes by public purchases and sales of shares on the stock market following the space shuttle Challenger disaster of 1986. Within minutes following the disaster, the prices of shares of contractors that could have been involved in causing the disaster dropped: Lockheed (ground support manager); Martin Marietta (manufactured the external fuel tank); Rockwell International (builder of the shuttle and its main engines); and Morton Thiokol (built the booster rocket). By the end of the day, the price of Thiokol had dropped 12 percent, while the other prices had each rebounded from 6 percent to 3 percent drops. It took six months to identify what caused the disaster (O-rings designed by Thiokol), but the wisdom of the stock market crowd was right on target on day 1 of the disaster.

Detailed investigations (including scrutiny of possible insider trading) turned up no clues to how the public immediately identified the culprit. Surowiecki believes that the wisdom of crowds explains this unusual finding. He identifies four contributing components to this wisdom: diversity of information and opinions; individual participants' independence in their contribution to the guesses; decentralization of sources of knowledge; and aggregation of the individual opinions into a collective decision.

Coordination problems
The wisdom of groups of people is challenged when they must coordinate the opinions and actions of large numbers of people. There are situations in which it is very difficult to sort out how to achieve the maximum benefits from the inputs of individual group participants, as in factories with many separate steps in production lines. Surowiecki demonstrates that the wisdom of groups of workers can often overcome these potential difficulties in successful collaborations.

Cooperation problems
Trusting strangers is something we do all the time, without thought, particularly in commerce. Surowiecki discusses how such trust developed as international commerce developed, and presents various studies on how people will cooperate in market settings.

The broader implications of the issues discussed in this book are far-reaching. Surowiecki makes a good case for a trust in democracy as a form of government, if the special interests of lobbying influences can be controlled.

What I found of most interest was a hope in the collective wisdom of mankind to deal with the challenges of global heating.

A serious deficiency in this book, however, is a total lack of consideration of intuition and collective consciousness - for which there is a major body of substantiating research. These constitute major further potential strengths in the wisdom of groups of people. A prime example is in the collective guesses that led to the location of the Scorpion.

Another annoying deficiency of the book is the lack of an index.

6 people found this helpful

Helpful

A must read but a little overwhelming.

Reviewed in the United States on June 2, 2023

Verified Purchase

I loved the author’s stories and he had plenty. The beginning with Galton a British scientists in the 1900s at a festival wanted to know if the crowd could guess the ox weight and remarkably the crowd was spot on, also, the author talked about a submarine scorpion that was lost and Craven got a group of people from mathematicians to salvage and rescue personnel with Chevas whisky as a reward, the group was able to pinpoint close where the missing submarine was found.
My takeaway is that I think the author is right , under the right circumstances, a diverse, independent and decentralized group will give you a better decision. Experts have bias and they make mistakes. On a critical matter, I would do the same use the wisdom of the crowd.
My negative is how do you organize a group, it would have been fantastic if he show practical and real world advice on how to use this concept. Otherwise, is good to know but how is this concept help me. And I had to speed read half the book, after awhile, is was the same concept over and over.

Helpful

Steven Farron

Important and Paradoxical

Reviewed in the United States on January 4, 2009

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Surowiecki's 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 world's 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 Darwin's 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.

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Luis Miguel Díez González

Good book about a great idea

Reviewed in Brazil on July 30, 2022

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Tha author structures a great idea about how crowds can have collective wisdom under certain circumstances, like granting diversity and independence of the group. He also analyzes the profound consequences that this idea has, in fields like politics and economics. Good read

Rai Vikrant

Must read.

Reviewed in India on May 10, 2022

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For everyone- intellectual or nonintellectual or pseudo-intellectual etc.

Matsu Shimizu

Great enlighting book

Reviewed in Mexico on September 27, 2018

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This book is a great way to think different how to make a better decision, it gives power to the decentralization of organizations and it deepens of the understanding of the behavior of the human being.

Ary

Très intéressant

Reviewed in France on December 26, 2016

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Ce livre incroyablement stimulant ouvre les yeux du lecteur individualiste, persuadé que lui seul peut et sait appréhender intellectuellement, voire contrôler le monde qui l'entoure. Erreur profonde ! Toute supputation, démonstration, recherche, quelle qu'elle soit, s'enrichit d'être le fruit d ela mise en commun de plusieurs cerveaux, qui, de préférence, ne se connaissent pas, et, encore mieux sont de diverses origines, ethniques, sociales, nationales. Le livre ne démontre rien scientifiquement, mais fonde ses observations sur des milliers d'exemples pris dans des domaines tirés de la vie courante aussi diversifiés que les pronostics sportifs, politiques, les jeux télévisés, etc.,etc. Journaliste, l'auteur a une solide formation d'historien, il en a la rigueur et aussi l'ouverture, à l'américaine. Ce que les Américains produisent de mieux. Un esprit d'ouverture. A lire !

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PF

Excellent delivery service

Reviewed in Canada on April 2, 2015

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Fascinating book that should be read by anyone caught up in the processes of 'decision-making' - voters as well as gamblers. Simply expressed, lucid insights which shed much light on the business of everyday life and politics. Excellent delivery service.

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The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations Hardcover – May 25, 2004

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