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  • THE WISDOMOF CROWDS

    WHY THE MANY ARE SMARTER THAN THE FEW

    AND HOW COLLECTIVE WISDOM SHAPES BUSINESS,

    ECONOMIES, SOCIETIES, AND NATIONS

    JAMES SuRowIEcKi

    I) 0 U B L E U A Y

    New York London Toronro Sydney Auckknd

  • SPUBLiSHED BY DOUBLEDAYa division of Random House, Inc.

    DOUBLEDAY and the portrayal of an anchorwith a dolphin areregistered trademarks of Random House, Inc.

    Some of the material in this book was originally published indifferent form in The New Yorker.

    Library of Congress Cataloging-in-Publication DataSurowiecki, James, 1967

    The wisdom of crowds why the many are smarter than the few and how collectivewisdom shapes business, economies, societies, and nations / James Surowiecki.

    p. cm.Includes bibliographical references.

    I. Consensus (Social sciences) 2. Common good. I. Title.JC328.2.S87 2003303.38dc222003070095

    ISBN 0-385-50386-5

    Copyright 2004 by James Surowiecki

    All Rights Reserved

    PRINTED IN THE UNITED STATES OF AMERICA

    June 2004

    5 7 9 10 8 6 4

  • INTRODUCTION

    one div ii) the hill I 9O~,the British scientist francs Galtorlleh his borne iii I lie wttn of Pl~iTlOtitO Bad head cI for a COtintflfair. ( ;alton was eighlv-h\e years old anti beginning to feel uk age.hIJI he was still brimming wIth 11)5 curiosity taut hao won himrenown -anti DIII I)YletV for his ivork DI) slatjsl ics and Ihe scienceof llcreditv. Anti OIi [hal parlicular day. \~hai(alton was curious,lI)OtIt \Vas ii ye stock.

    (Jaltons destination was the annual \~st of Englanc: I atStock and Ponil iv I :xhihition a regional fair where the local farm-ers and townspeople gathered U. appraist. (lie quaiit~of eachothers cattle, sheep, chicke ns, horse arId pigs. \\hadering t hrotlghrows td stalls examining isnrkhorses and prit.e hogs may Seem 10have been a sirange way for a scientist les1,et-iall~an elderly one)IC) spend an alttrI)OOn, 1)111 there was a certain logic 10 is.. (~dltonwas a man obsessed \~ith two I hiogs: the measurement of physicaland mental qualities, and Urceding. And whai. alter all - is a live-stock shots bum a big showcase br the effect:; of good aI id badbreeding?

    l3reetling mattered to Galton because lie believed that on) ai cry Few penile had the characteris~mcsnecessary to keep socielies[ICiltin: I le had deo aeti much ot his career to measuring thosecharacteristics n fact, in order to prove thai tIM VaSl IbflhiorItV of

  • XII INYflODUCYION

    people did not have them. At the International Exhibition of 1884in London, for instance, he set up an Anthropometric Laborator)where he used devices of his own making to test exhibition-goerson, among other things, their Keenness of Sight and of Hearing,Colour Sense, Judgment of Eye, [and] Reaction Time. His exper-iments left him with little faith in the intelligence of the averageperson, the stupidity and wrong-headedness of many men andwomenbeing so great as to be scarcely credible. Only if power andcontrol stayed in the hands of the select, well-bred fet~Galton be-lieved, could a society remain healthy and strong.

    As he walked through the exhibition that day, Galton cameacrossa weight-judging competition. A fat ox had been selected andplacedon display, andmembers ofa gatheringcrowd were lining upto place wagers on theweight of theox. (Or rathe~they were plac-big wagers on what the weight ofthe ox would be after it had beenslaughtered and dressed.) For sixpence, you could buy a stampedand numbered ticket, where you filled in your name,your address,and your estimate. The best guesses would receive prizes.

    Eight hundred people tried their luck. Theywere a diverse lot.Many of themwere butchers and farmers, whowere presumably ex-pert atJudging the weight oflivestock, but there were also quite afew people who had, as it were, no insider knowledge of cattle.Many non-experts competed, Galton wrote later in the scientificjournal Nature, like those clerks and otherswho have no expertknowledge of hones, but who bet on races, guided by newspapers;friends, and their own fancies. The analogy to a democraqc inwhich people of radically different abilities and interests each getone vote, had suggested itself to Galton immediately The averagecompetitorwas probably as well fitted formaking a just estimateofthe dressed weight of the ox, as an average voter is ofjudging themerits ofmost political issues on which he votes, he wrote.

    Gakon was interested in figuring out what the average vote?was capable of because he wanted to prove that the average voterwas capable of venj little. So he turned the competition into an im-

  • )PITRODUCTION XIII

    promptu experiment. When the contest was over and the prizeshad been awarded, Galton borrowed the tickets from the organiz-ers and ran a series of statistical testson them. Galton arranged theguesses (which totaled 787 in all, after he had to discard thirteenbecause they were illegible) in order from highest to lowest andgraphed them to see if they would form a bell curve. Then, amongother things, he added all the contestants estimates, and calcu-lated the mean of the groups guesses. That number represented,you could say, thecollective wisdom ofthe Plymouth crowd. If thecrowd were a single person, that was how much it would haveguessed the ox weighed.

    Galton undoubtedly thought that the average guess of thegroup would be way off the mark. After all, mix a few very smartpeople with some mediocre people and a lot ofdumb people, andit seems likely youd end up with a dumb answet But Galton waswrong. The crowd had guessed that the ox, after it had beenslaughtered and dressed, would weigh 1,197 pounds. After it hadbeen slaughtered and dressed, the ox weighed 1,1% pounds. Inother words, the crowd~sjudgmentwas essentially perfect. Perhapsbreeding did not mean so much after all. Calton wrote latet Theresult seemsmore creditable to the trustworthinessofa democraticjudgment than might have been expected. That was, to say theleast, an understatement.

    II

    What Francis Galton stumbled on that day in Plymouth was thesimple, but powerful, truth that is at the heart ofthis book. underthe right circumstances, groups are remarkably intelligent, and areoften smarter than the smartest people in them. Groups do notneed to be dominated by exceptionally intelligent people in order tobe smart. Even if most of the people within a group are not espe-cially welJ-info~edor rational, it can still reach a collectively wise

  • XIV INTRODUCTION

    decision. This is a good thing, since human beings are not perfectlydesigned decision makers. Instead, we are what the economist Her-bert Simon called houndedly rational. We generally have less in-formation than wed like. We have limited foresight into the future.Most of us lack the abilityand the desireto make sophisticatedcost-benefit calculations. Instead of insisting on finding the bestpossible decision, we will often accept one that seems good enough.And we often let emotion affect our judgment. Yet despite all theselimitations, when our imperfect judgments are aggregated in theright way our collective intelligence is often excellent.

    This intelligence, or what Ill call the wisdom of crowds, is atwork in the world in many different guises. Its the reason the Inter-net search engine Google can scan a billion Web pages and find theone page that has the exact piece of information you were lookingfor Its the reason its so hard to make money betting on NFLgames, and it helps explain why for the past fifteen years, a fewhundred amateur traders in the middle of iowa have done a betterjob of predicting election results than Gallup polls have. The wis-dom of crowds has something to tell us about why the stock marketworks (and about why every so often, it stops working). The idea ofcollective intelligence helps explain why when you go to the con-venience store in search of milk at two in the morning, there is acarton of milk waiting there for you, and it even tells us somethingimportant about why people pay their taxes and help coach LittleLeague. Its essential to good science. And it has the potential tomake a profound difference in the way companies do business.

    in one sense, this book tries to describe the world as it is,looking at things that at first glance may not seem similar but thatare ultimately very much alike. But this book is also about theworld as it might be. One of the striking things about the wisdomof crowds is that even though its effects are all around us, its easyto miss, and, even when its seen, it can he hard to accept. Most ofus, whether as voters or investors or consumers or managers, be-lieve that valuable knowledge is concentrated in a very few hands

  • INTRODUCTION XV

    (or, rather, in a very few heads). We assume that the key to solvingproblems or making good decisions is finding that one right personwho will have the answer. Even when we see a large crowd of peo-ple, many of them not especially well-informed, do somethingamazing like, say predict the outcomes of horse races, we are morelikely to attribute that success to a few smart people in the crowdthan to the crowd itself. As sociologists Jack B. SoIl and RichardLarrick put it, we feel the need to chase the expert. The argumentof this book is that chasing the expert is a mistake, and a costly oneat that. We should stop hunting and ask the crowd (which, ofcourse, includes the geniuses as well as everyone else) instead.Chances are, it knows.

    III

    Charles Mackay would have scoffed at the idea that a crowd ofpeople could know anything at all. Mackay was the Scottish jour-nalist who, in 1841, published Extraordinaiy Popular Delusions andthe Madness of Crowds, an endlessly entertaining chronicle of massmanias and collective follies, to which the title of my book payshomage. For Mackay crowds were ne

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