The Wisdom of Crowds:

Why the Many are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations

Suroweicki, J. (2004). The wisdom of crowds: why the many are smarter than the few and how collective wisdom shapes business, economies, societies, and nations. New York: Doubleday. 

The main message from The Wisdom of Crowds is that crowds are wise when there is a balance between the information that everyone in the group shares and the information that each of the members of the group holds privately. The author argues that groups make better decisions than the smartest of their individual members when they combine all of the small bits of information that each member knows.

Groups need to satisfy three other conditions in order to be wise. They need diversity, independence of thought, and a decentralized structure. In a diverse group, it is easier for people to say what they really think because each person is likely to have his/her own view.

Diversity encourages the second condition, independence of thought. When people think independently, they bring their private information to the table so a better decision can be made. In addition, if there are enough people who act independently from the whole, the crowd is less likely to get sucked into a mob mentality.

Finally, decentralization makes wise crowds possible. The author holds to the belief that those closest to the problem are the ones who can best solve it. So, if the structure permits people who are dealing with an issue to decide the solution themselves, the solution will be better than if those at the top of the hierarchy provided it.

Based on these ideas, the author suggests that corporations need new ways to encourage employees to uncover and act upon private information. This means that corporations need to increase the amount of decision making power that groups have all around the company. If groups meet the conditions and are allowed to make decisions, they will often come up with a solution that is better than what any one individual could have created.

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