In 2004, people were still coming off the high of Gladwell’s The Tipping Point and Levitt and Dubner’s Freakonomics orange/apple hadn’t hit the store shelves yet. At that time, a similar type of book came out: The Wisdom of Crowds: Why the Many Are Smarter Than the Few, by James Surowiescki. The book falls in the genre of economics crossed with psychology and academic classroom experiments. Surowiescki offers some interesting insights on why groups make better decisions than individuals (as listed below) but fails to connect it fully with the concept of democracy. The book also fails to fully delve into the counter-argument that groups often are often inefficient (think meetings where you sit there forever). A good read chock full of good examples if you can stand yet another economics/psychology/academia book.
- For the wisdom of crowds to have its full effect, three conditions must be met: 1) Diversity, 2) Independence, and 3) Decentralization.
- Diversity: “Homogeneous groups become cohesive more easily than diverse groups, and as they become more coheseive they also become more dependent on the group, more insulated from outside opinions, and therefore more convinced that the group’s judgement on important issues must be right.” Diversity prevents groups from “rationalizing away counterarguments.” Surowiescki also notes that even a little diversity helps a lot because if a dessenter has at least one ally, the chance he will speak up (as opposed to just staying silent) is considerably higher. Diversity also makes “it easier for individuals to say what they really think.” But does that mean there is no such thing as cohesive diversity?
- Independence: Individuals should pay “much less attention to what everyone else is saying” in making successful group decisions. Taking cues from everyone else around you is helpful as a “rule of thumb” and imitation can be really useful in spreading good ideas but “slavish imitation hurts.” It’s a good thing then that most of the time, the bigger the decision, the less likely imitation will take hold of a group.
- Decentralization: “…a decentralized system can only produce genuinely intelligent results if there’s a means of aggregating the information of everyone in the system.” There needs to be a way to bring together all the independent decisions in order to form the collective correct decision. Markets usually work because the price is that aggregator, bringing together all the independent buying and selling.
- There are three problems that can unhinge the wisdom of crowds: cognition, coordination, and cooperation. Read the book for more on these.
- Thomas C. Schelling writes, “People can often concert their intentions and expectations with others if each knows that the other is trying to do the same.” In an experiment, Schelling told two students that they were to meet in New York City on a specified day but at no specified time or place. The goal: find each other. A majority of students said they would meet someone at the information booth at Grand Central Station at noon. In other words, most students would find each other in the vast city if they had the same intentions and expectations. I wonder where people would meet in San Francisco?
- Deliberation is tricky because if a majority supports one positions, more arguments will be made for that position and uncertain individuals will likely be swayed toward that position. However, people who have more extreme positions are more likely to have strong, coherent arguments and are willing to voice them.
- “…the order in which people speak has a proufound effect on the course of a discussion. Earlier comments are more influential…”
- “…people who imagine themselves as leaders will often overestimate their own knowledge and project an air of confidence and expertise that is unjustified.” Yea, no kidding. Those who speak, don’t know. Those who know, don’t speak.
- Advocates in deliberations are often chosen as those who hold status (your boss) or those who are talkative instead of on the basis of perceptiveness or keeness. This shrinks the chance of a group making good decisions. In other words, shut up and listen.
- “If small groups are included in the decision-making process, then they should be allowed to make the decisions. If an organization sets up teams and then uses them for a purely advisory purposes, it loses the true advantage that a team has: namely, collective wisdom.”