Reading The Wisdom of Crowds, it dawned on me: much of this could be applied to social media and the blogging world. The book speaks volumes as to why social media is exploding--and why the old media is dieing. It could also explain other related issues, such as why corporations are so slow to grasp this movement. On another level, the theories explain why some companies are so badly managed and why some small groups make such stunningly bad decisions. Author James Surowiecki wrote a wonderful book here, on par with The Tipping Point and Freakonomics--with even longer range implications.
On the face of it, the author's theme is simple, that large groups or "crowds" make better decisions under most conditions. It may appear odd--after all, we've been taught that that "average" is mediocre. We've also been led to glorify the "amazing individual"--the super CEO, the star quarterback and so on. But it turns out, with decision making, "the average can mean excellence." And our celebration of super individuals may be grossly misplaced.
The author starts by showing how study after study shows that large groups, on average, will guess, say, the weight of a cow or elephant much more accurately than any individual. Then he builds the case for how these decisions can come into play across government, business and other areas of our lives.
Crowds need four characteristics to be successful: diversity of opinion; independence (your opinions can't be determined by those around you); decentralization (people are able to specialize and draw on local knowledge); and aggregation (some mechanism exists for turning "private judgments" into collective decisions).
Diversity is an interesting ingredient.
It's almost always better to have a wide range of people and views, even if some of them are extreme. As he puts it, collective decisions are most likely to be good ones when they're made by people with diverse opinions reaching independent conclusions, relying on their own information." Blogging, and social media, doesn't really represent a "crowd" in the purest sense (there's no collective decisions). But it does represent a myriad of voices, it's heavily decentralized and, for the most part, made up of independent thinkers. Grass roots power and authority is also important. The more the power comes from the ground up, the better the decisions and ideas over the long haul.
Compare the social media movement (grassroots, individualistic, conversation-driven) to the traditional media model--top down authority, little diversity and questionable independence (actually the last one is subject to debate, but suffice it to say the big network news shows and big league newspapers tend to follow each other like a herd. How else could you explain the weak news coverage that led up tothe invasion of Iraq).
On the opposite end of crowds are individuals and small, like-minded groups. Surowiecki uses examples like Kennedy's Bay of Pigs and the Challenger disasters to show what happens when a small group of like-thinking government types drink the same koolaid for too many months, then make decisions with little input from outsiders. Corporate chieftans can get caught in the same trap, managing in a vacum and guided by a handpicked few at the top. The boards of directors are supposed to play the role of the objective crowd, but too often they defer to the CEO. In any case, when decisions are made by people who all think alike, bad things can happen (think Enron).
The book is chocked full of interesting, often contrarian ideas. For example, the idea that intelligence and expertise is overated when it comes to good decisions and accuracy. People across almost all professions all believed they know more than they really did, studies show. Yet few can beat the averages, whether betting on craps in Las Vegas, a sports team in Yankee Stadium or a hot stock on Wall Street.
Take the stock market. Only a small number of mutual funds ever beat the Dow consistently year after the year. These funds are managed by the best and brightest--financial minds that come out of the best Ivy league colleges. Why can't they beat the "average" or market? (The Dow Jones, of course, represents the crowd) "I could find no studies that showed an important advantage for expertise," said one Wharton professor, referring to studies of market forecasts and analysis (for a similar take on this, read another great book A Random Walk Down Wall Street).
The book covers a lot of other ground, showing how crowds are influenced, why markets work so well, why birds always fly in formation, why collaborating scientists succeed, why the CIA, FBI and other intelligence agencies often fail, and much more. It all goes back to the wisdom of crowds over the individual. Whether you're a blogger, politician, student or business leader, there's a ton of lessons in here for you.