HR Management & Compliance

The Wisdom of Crowds

HR practitioner Paul Knoch reviews The Wisdom of Crowds by James Surowiecki. He finds that while the book is a bit heavy on theory and light on real-life examples, the examples that are provided are revealing and the book raises the important question of whether businesses should look beyond a small field of experts or managers when making decisions.


Remember the game-show sensation “Who Wants To Be A Millionaire?” Contestants vied for a prize of one million dollars by answering a series of questions correctly. The questions started out fairly easy and became increasingly difficult. When stumped, a contestant could choose from three “lifelines” for help. One lifeline removed half of the possible answers, leaving the contestant with a 50/50 chance of guessing correctly. Another lifeline allowed the contestant to call a more knowledgeable friend and ask for help. The third lifeline simply polled the audience. If you watched the show, you may recall that the audience was almost always right.

So was the audience comprised of geniuses? My guess is that the average TV audience is probably just that — average. So why could the audience come up with the correct answer an astounding 94 percent of the time? Remember, contestants used a lifeline only when they didn’t know the answer, so the questions that the audience answered were usually fairly difficult. The idea that a group can be collectively “smarter” than an individual (even an individual who is an expert) is at the heart of James Surowiecki’s book The Wisdom of Crowds.

Surowiecki’s assertion may be counter-intuitive to what you have been told or even experienced. Conventional wisdom would dictate that if you want the best advice, you seek out a small group of the most knowledgeable people you can find. While experts certainly have knowledge, Surowiecki uses compelling examples to show how groups with certain characteristics have the ability to produce results that are uncannily accurate.

One example in The Wisdom of Crowds recounts a rural fair where a contest was held to judge the amount of beef a certain cow would produce after it was butchered. More than 800 entries were submitted. Certainly many of these entries were submitted by people who would be considered “experts,” but the majority of the entries were from average folks who happened to be attending the fair. The range of guesses varied, but when the average of all the guesses was calculated, the accuracy was astounding. Compared to the actual weight of the beef after butchering, the average of all the guesses (around 900 lbs) was off by less than one pound.

Surowiecki includes other examples of “wise crowds,” including stock markets and Google, which determines search results based on what all Internet users collectively determine are the most accurate results for any given term. Essentially, Surowiecki is arguing that the sum is greater than the parts. When the right conditions exist, average ordinary people as a group can make astoundingly accurate predictions or decisions.

So what is a “wise crowd?” We’ve all been in crowds before that certainly didn’t seem smart, much less wise. To be “wise,” crowds need four elements: diversity of opinion, independence of members, decentralization, and a method for aggregating opinions. For anyone in business, that is a very interesting assertion. Consider your typical management meeting with its office politics, dominant personalities, and stifling fear of dissent. Is that truly a conducive environment for determining a wise decision? Is it possible that relying on the opinions of a select few “experts” or a small group of management may not be the best approach? Would an organization be better off including the input of all staff members regardless of their expertise?

The Wisdom of Crowds is a good read for anyone interested in social science, but it also has some powerful implications for business leaders. It’s written in a style that will be familiar to anyone who has read Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (P.S.) or any of Malcom Gladwell’s books. Unfortunately, Surowiecki lacks Gladwell’s ability to add just the right amount of interesting examples to liven up the denser theoretical material. The book does drag a little at times, but ultimately, the persistent reader will be rewarded by Surowieci’s improbable but compelling tribute  to the intelligence of the masses.

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