If you ever watched Who Wants to Be a Millionaire?, the one thing you learned for sure was to never, ever, vote against the audience when you used your “ask the audience” lifeline. Why, because 91% of the time, they were right! That blew away the accuracy record of “asking a friend”, (supposedly the smartest person you can come up with and someone who can find internet answers in under 15 seconds), where that singular expert was only right 67% of the time. So always go with the audience consensus.
It is this phenomenon that James Surowiecki’s book,
The Wisdom of Crowds takes on.
And in this Web 2.0 world, it is a very timely and interesting read. This type of wisdom is at the heart of most of the successful software businesses today that count on traffic drive and certainly those that depend on “friendly referral” or page rating formats such as Trip Advisor, Netflix, Amazon, Google or the other hundreds that are out there. Such importance to the current technology software business alone gives you good reason to at least become familiar with this book’s ideas.
Surowiecki starts by outlining the four conditions that characterizes “wise” crowds who make accurate judgments:
Diversity of Opinion (the corollary to this is that experts are often wrong-their view can be too narrow. This is easy to observe in science as well as less obvious environments such as the venture capital world.)
Independence (people’s opinions are not determined by others around them)
Decentralization (people are able to specialize and draw on local knowledge)
Aggregation (some mechanism exists for turning private opinion into a collective decision)
I thought one of the most interesting chapters of the book was Surowiecki’s discussion of decentralization and when it works well (using the on-going of LINUX as an example) and when it doesn’t work as well (using the intelligence community’s organization around the time of September 11th).
I will say, however, as others have commented, because the author is a financial writer for the New Yorker, some of the discussion in general in the first half of the book was a bit heavy to me personally with many examples drawing on “markets”. In general, I was happy I read the book, although I think I was expecting to find more direct information about and advice on how this thinking impacts the Internet business environment, which is actually a very good place for these accurate judgments to take place since it tends to meet his four criteria most of the time.
The Yawn-o-Meter (a very personal metric meant to reflect only how easy I found it to read based on a Harry Potter book being a 1 and War and Peace being a 10 or, if your prefer, a Guy Kawasaki book compared to an Edward Tufte): I personally think this was the hardest of the six books I covered in this week’s blog, probably a 7 or so. I think that is the case because ultimately I thought the book went a little bit too far afield and some of the explanation and examples were a bit too dense. That said, for those of you who are impressed with the both prevalence and financial ramifications of “crowd wisdom” on the web, it is definitely worth your time to pick up. What I am really hoping is that there will be a book coming soon that focuses more on the direct application of this phenomenon in the world of Internet business. The author himself even talks about the increased importance of the Internet and how it may be used to “unearth” and apply this wisdom, but he doesn’t really explore it any depth. That’s the book I really want to read, but for now, this is a start.