The Wisdom of Crowds by James Surowiecki (PDF)

Description

In this fascinating book, New Yorker business columnist James Surowiecki explores a deceptively simple idea: 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. With boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, behavioral economics, artificial intelligence, military history, and politics to show how this simple idea offers important lessons for how we live our lives, select our leaders, run our companies, and think about our world.

User’s Reviews

Reviews from Amazon users which were colected at the time this book was published on the website:

⭐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 problemsSurowiedki 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 problemsThe 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 problemsTrusting 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.

⭐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.

⭐I actually bought this copy to give to one of the Directors of a large company that I advise. He was dabbling in consensual feedback as the core of a brainstorming session that I was in and I mentioned this book and then ordered it for him before he went back to the US. First comment – I love Amazon prime, because you can do this – think of a book and receive it so quickly. As for the book, it is something that sticks in your head and comes back to you at the most unexpected moments – even at my kid’s Xmas fair I looked at the ‘how many sweets in the jar’ stall differently. Very insightful and useful at meetings where you can see the dangers of directed groupthink most clearly but also useful as a general way of thinking about problem solving. Highly recommended.

⭐Half is bull but the other half is?

⭐Good read so farVery interesting

⭐This book was a real eye-opener for me and got me thinking more about suspicions that I, as a casual observer of life, had for ages about the fallibility of experts.

⭐this arrived in time but is in large print. May be I did not read the description well. It is readable even though bulky

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