This week I read the book “The Wisdom of Crowds” by James Surowiecki.
The book defends the premise that many people of arbitrary intelligence often come to better conclusions than one or a few people of exceptional intelligence. This counterintuitive statement which I first saw in Condorcet’s Jury Theorem is made quite plausible with a very readable mix of theory, anecdotes and loads of studies.
Overall a very fun book which makes some pressing statements about the way we organize society and perceive knowledge that prompted me to rethink my own views.
I put my summary on the wiki, but I’ll past it here completely for your reading pleasure comments can be placed here and I am receptive towards edits in the wiki (register before editing).
Chapter 1
The many may very well be smarter than the smartest few. This may seem counterintuitive, Surowiecki gives a lot of interesting reasons backed up with tons of studies and anekdotes about why this is the case.
If you put together the information of a lot of people and the error of a lot of people in the right way, the information is filtered and the error is cancelled out. Preconditions for the effect:
- Diversity of opinions
- Independence
- Decentralization
- Aggregation
Chapter 2
You want to generate as many loser as quickly as possible and kill them. So you need diverse creators, financers and also diverse decision makers. This way the best will be created and will survive.
(The internet is widely diverse and creating a lot of stuff, what is missing currently is a smart way of aggregating the wide wide variety of information.)
p.31 Adding in a few people who know less, but have different skills actually improves the groups performance.
The fields of decision making and strategy are impossible to become an expert in single-handedly.
Homogenous groups often fall prey to group think. Their isolation from the outside world and self-convincedness makes dissent highly improbable.
Chapter 3
Independence means using private information. This not only relates to facts but also to more indirect forms of knowledge, interpretation and analysis. Rationality and impartiality is not required.
Problems lie in herding and risk averseness.
Information cascades a sequential decision making process where people stop using their own knowledge and look at what other people are doing, thinking that they are using their own knowledge while they are not (they are also looking at others)
(Sunstein, cybercascades?)
p.60 groups are better at deciding between possible solutions to a problem than they are at coming up with them
Smart selection by:
- Wide array of options and information
- Willingness of some people to put their own judgement ahead of the group
Most people are usually overconfident.
Chapter 4
Decentralization is a good thing, if it is paired with adequate aggregation.
Chapter 5
Friedrich Hayek (http://en.wikipedia.org/wiki/Friedrich_Hayek) on coordination problems
Chapter 6
Cooperation problems
strong reciprocity the willingness to punish bad behaviour at no benefit (or even at a cost) to yourself
A kind of prosocial behaviour depends on being:
- nice
- forgiving
- retaliatory
Markets increase prosociality out of a purely selfish necessity. The cost of distrusting each transaction is too high.
Mancur Olson (http://en.wikipedia.org/wiki/Mancur_Olson) - “The Logic of Collective Action”
Public goods are only valuable if enough people participate (see Sunstein).
experiments by Ernst Fehr and Simon Gächter: the Dictator Game (http://en.wikipedia.org/wiki/Dictator_Game)
Chapter 7
A wide discourse on traffic systems and how these could be more efficiently priced hyper responsive traffic pricing systems and people’s resistance to them.
Chapter 8
Homogenous small groups do not work well, even a single minority opinion will nuance the group and prevent group polarization.
(We need Devil’s advocates.)
Cass Sunstein - “Why Societies Need Dissent”
Groups made better decisions than their smartest members.
Chapter 10
A discussion on layers of management and bureaucracy versus dynamic loosely coupled organizations.
Inauthentic behaviours from subordinates are usually rewarded. It is usually not in your best interest to report failure to your boss.
The setting of targets ellicits gaming the targets (advertedly setting them too low) and then cheating on them in any way possible.
Giving people the possibility to influence their working conditions is often enough to get better results (even if they will not use the possibilty at all).
Success is usually a question of luck and not of skill because the problems are so difficult.
Chasing the expert is a mistake.
Chapter 11
Investors herd, they are overconfident, they underestimate randomness, explain good results on skill and bad results on malfortune.
Investors do not have to be rational for markets to work well.
Once everyone starts piggybacking on the wisdom of the group, then no one is doing anyting to add to the wisdom of the group.
Too much information also influences, especially if it comes with hype or commentary from people in power.
Chapter 12
National Issues Convention Deliberative Poll (http://en.wikipedia.org/wiki/Deliberative_opinion_poll) James Fishkin proposed Deliberation Day
Given enough information and the chance to talk things over with peers, ordinary people are more capable of understanding complex issues and making meaningful choices about them.
Efforts to stop inertia in the people.
Public Choice Theorists (http://en.wikipedia.org/wiki/Public_choice_theory)
Most decisions are about what to do, involving values, trade-offs and choices about which kind of society we should live in. There is no reason to think that experts are better at making these decisions than the average voter.
