His main proposition is that a group can come to a wiser decision than an individual if three conditions hold: diversity, independence and decentralization. He breaks such decisions into three categories: cognition, coordination and cooperation problems, giving examples of each.
– Diversity means that people have different experience, knowledge, and approaches and so add more little bits of wisdom to the crowd.
– Independence means that each member makes their own decision rather than being influenced by the decision of others.
– Decentralisation is talking about the idea that knowledge is spread so that those closer to a problem have the knowledge to solve it.
Then, aggregating the individual decisions gives an overall wise choice. Note that just because the group comes to a wise conclusion it doesn’t mean that the individuals within the group will. In fact, for a group to perform better it needs opposing ideas so that the consensus of the group is challenged and so strengthened or replaced.
The chapter on working in small teams covers this and other issues of influence within a group. I found this practical: e.g. the idea that when a group meets to come to a decision the first to speak will usually frame the possible solutions and thus limit possible outcomes. Also the one with most airtime is more likely to have a larger influence on the final decision.
He focuses on the financial markets and although a lot of what he said was conjecture, his conclusions backed up why around 80% of fund managers under perform the index they aim to beat.
His discussion about how capitalism is based on trust was a nice new paradigm. He looked at the example of how the Quakers did so well – they were trustworthy in pricing, quality of goods and upholding agreements. Funnily they did better than everyone else and eventually their competitors had to follow their business model, bringing us closer to the system we have today.
While Surowiecki presents a convincing case, the book is so filled with non-sequiteurs and a baseless view that the US is somehow fundamentally different to every other society it’s not always easy to take him seriously. Phrases along the lines of “it is clear that” or “you can’t disagree with the view” didn’t help.
That said, I valued what I learnt and will use the ideas in the future.