Wisdom of Crowds

BusinessWeek has a review of James Surowiecki's The Wisdom of Crowds. The book looks at the age old assumption that crowd behaviour is behaviour of the mindless -- it shows that far from being stupid, groups of people tend to out perform individuals. This tends to make sense of you stop thinking of crowds as a herd of hysterical people and more as a team. Surowiecki references the case of the May 1968 disappearance of the USS Scorpion. The US Navy had a general sense of where the submarine went down, but couldn't pinpoint it. Experts were brought in and asked to give their expert opinion on where to look, based on available data. Collectively, they were off by 220 yards, even though individually, not one of the experts were as close. Surowiecki then extends his analogy to businesses -- if teams tend to perform better, why do businesses still rely on individuals to make key strategic decisions instead of relying on a team effort? Already, such thinking is starting to make its way into public decision making -- mainly in the form of decision markets, such as the Hollywood Stock Exchange, in which wagering on box office returns is a better forecast method of predicting what films will become hits and what will fail.