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The Wisdom of Crowds

Wisdom of CrowdsNew Yorker business columnist James Surowiecki argues that “under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.”

That is a pretty controversial thought in a country that treats its experts like stars and pays them astronomical salaries plus stock options.

Surowiecki provides a wide range of examples and scenarios where his thesis applies. His cases are stretching from business and politics to science.

Aren’t we all trying to figure out what’s happening next and why?
Reading the book improves your understanding of mass phenomenons when you experience them. How do traffic jams form? How will a crowd react in a political discussion? How does the decision making in financial market work? Reading this book will improve how you participate yourself in a group setting and you will also become more understanding of others.

What’s required for a crowd to be “smart”?
Surowiecki states that wise crowds need diversity of opinion; independence of members from one another; decentralization; and a good method for aggregating opinions.
It is easy to see why a lot of crowds fail to be smart: In many business settings likeminded people are clustered together. Speaking up might endanger your career. It is easier to go against your own convictions and avoid friction with the crowd. That where Surowiecki puts the finger in the wound.

Will my case really apply?
The book covers at a lot of eventualities. That makes it much harder to rip Mr. Surowiecki’s thesis apart.
The process of decision making within groups is very similar – in totally different settings -if certain components are the same.

My best use of the thesis
The “wisdom of the crowds” theory can be applied in many different ways. I think the book is especially interesting from the marketers‘ perspective. If you can create a “smart crowd” with a number of well chosen individuals you can essentially form a crystal ball that will work much better than the most expensive trend scouts of the world. Companies could actually save a ton of money in the short and long run (by avoiding costly mistakes).

The end of the book reveals that the author is actually a bit on an agenda. Surowiecki becomes very visionary and ambitious in how far his thesis could be applied. The end also becomes a bit too lengthy and theoretical in my eyes.

The book has dynamite potential. It promotes a radical shift in how wisdom is formed in our society. Imagine how that could tie into religion? Catholic Church anybody? This book could have the power to tear the world apart if its principles were applied through every aspect of our lives. It promotes more critical thinking and the undermining of authority in many cases.

I could see how The Wisdom of Crowds could reshape the whole Blogosphere: If someone could come up with a smart opinion aggregator we would have a tool at hand very millions of very independently thinking subjects, with diverse opinions, that are also decentralized could “vote” on any given subject. A perfectly smart crowd that is…

PS:
I was a currency trader in my former life. That meant that I constantly had to figure out the behavior of all the other players in the market (“the crowd”). I wish I would have read this book twenty years ago.

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