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The wisdom of crowds
Surowiecki J., Anchor, New York, NY, 2005. 336 pp. Type: Book (9780385721707)
Date Reviewed: Jul 7 2006

Surowiecki’s now-famous book examines one central question: Is a group “smarter than the smartest people in [it]?” If Surowiecki’s claim is to be believed, the crowd is indeed smarter. In this book, Surowiecki goes on to examine the conditions under which the crowd’s wisdom can peak, how its power can be tapped into, and how to avoid the pitfalls. Yet one thing that the book does not address in a thorough manner is the reason why such a counterintuitive result holds true.

While most of the points being raised in the book may not be new to someone working in the field of group behavior and dynamics, the impact of the book stems from Surowiecki’s ability not only to transform results of academic studies into a series of anecdotes that can be understood by a lay audience, but to do so without going overboard, trying to twist them to say more than what they do. The book is written in a brisk and entertaining manner, jumping between studies of sociology, economics, and psychology with ease, while shifting through real-world cultural and business happenings.

From the beginning, Surowiecki identifies four conditions to be met for a group to get its act right—diversity, independence, decentralization, and aggregation. Take any of these away and the crowd becomes a mob, taking extreme positions, susceptible to influence by a leader in the group, and reinforcing each other’s limited viewpoint. Surowiecki spends several of the book’s sections providing examples of how a group got it all wrong (for example, the Columbia accident investigation board and the Enron debacle), making the book well rounded.

One of Surowiecki’s biggest fascinations is with the performance of prediction markets. These are speculative markets that bet on the possibility of occurrences of future events—political elections, box office hits, and so on. Surowiecki draws our attention to the Iowa Electronic Markets, which try to predict the outcome of presidential and congressional elections. Studies have shown that the market repeatedly outperforms all major opinion polls and is able to predict the outcome far in advance. Surowiecki champions the use of similar markets within a company to gauge public opinion, estimate product announcement dates by rival companies, and so on. Although several companies have started using such markets internally, they remain an exception, mainly because of the inherent structural dependence on a leader to make decisions. Although Surowiecki calls for providing more power to a group’s collective decision making capabilities, a more balanced and more readily accepted approach would be to use them as another guide to arrive at decisions rather than as a replacement for a leader.

The book’s origins are in financial columns in The New Yorker, where Surowiecki works as a staff writer. This influences its easy-to-read, jargon-free style, but at the same time, at certain points, makes it repetitive. Since the target audience of the articles, and by extension, the book, is the general public, the scientific rigor is missing, though notes and pointers have been provided for anyone interested in following the various studies mentioned in the book. At times, Surowiecki tries to extrapolate the findings to cover moral and political issues like corporate corruption, which distract from his otherwise tight narrative.

All in all, this is an engaging, mostly well-written book that should be read by anyone interested in exploring the power and dynamics of a group.

Reviewer:  Srijith Nair Review #: CR133039 (0708-0778)
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