Introduction, Part II

What Francis Galton stumbled on that day in Plymouth was the simple, but powerful, truth that is at the heart of this book: under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them. Groups do not need to be dominated by exceptionally intelligent people in order to be smart. Even if most of the people within a group are not especially well-informed or rational, it can still reach a collectively wise decision. This is a good thing, since human beings are not perfectly designed decision makers. Instead, we are what the economist Herbert Simon called “houndedly rational.” We generally have less information than we’d like. We have limited foresight into the future. Most of us lack the ability—and the desire—to make sophisticated cost-benefit calculations. Instead of insisting on finding the best possible decision, we will often accept one that seems good enough. And we often let emotion affect our judgment. Yet despite all these limitations, when our imperfect judgments are aggregated in the right way our collective intelligence is often excellent.

This intelligence, or what I’ll call the wisdom of crowds,” is at work in the world in many different guises. It’s the reason the Internet search engine Google can scan a billion Web pages and find the one page that has the exact piece of information you were looking for. It’s the reason it’s so hard to make money betting on NFL games, and it helps explain why for the past fifteen years, a few hundred amateur traders in the middle of iowa have done a better job of predicting election results than Gallup polls have. The wisdom of crowds has something to tell us about why the stock market works (and about why every so often, it stops working). ‘The idea of collective intelligence helps explain why when you go to the convenience store in search of milk at two in the morning, there is a carton of milk waiting there for you, and it even tells us something important about why people pay their taxes and help coach Little League. It’s essential to good science. And it has the potential to make 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 that are ultimately very much alike. But this book is also about the world as it might be. One of the striking things about the wisdom of crowds is that even though its effects are all around us, it’s easy to miss, and, even when it’s seen, it can he hard to accept. Most of us, whether as voters or investors or consumers or managers, believe that valuable knowledge is concentrated in a very few hands (or, rather, in a very few heads). We assume that the key to solving problems or making good decisions is finding that one right person who will have the answer. Even when we see a large crowd of people, many of them not especially well-informed, do something amazing like, say predict the outcomes of horse races, we are more likely to attribute that success to a few smart people in the crowd than to the crowd itself. As sociologists Jack B. Soll and Richard Larrick put it, we feel the need to “chase the expert.” The argument of this book is that chasing the expert is a mistake, and a costly one at that. We should stop hunting and ask the crowd (which, of course, includes the geniuses as well as everyone else) instead. Chances are, it knows.

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