“The Wisdom of Crowds” by James Surowiecki

Subject: Decision Making
Pages: 5
Words: 1568
Reading time:
6 min
Study level: PhD

Thesis statement

The thesis of the Wisdom of the crowds is that a crowd of brilliant individuals with independence of decision-making will tend to make better judgment than anyone person irrespective of his level of intelligence or experience. To support his thesis, the author analyses an array of events, which include the prediction of the weight of a pig at a county fair and the explosion of the challenger space shuttle, which happened with fatal consequences (Surowiecki, 2004). The illustrations advance his argument that the rule of the crowd is not a bad thing after all. He correlates various human behaviors traits to the decision-making processes and goes further to link them with the trend in investment decisions.

The last two decades have seen an upsurge in the emergence of social marketing business ventures inspired by the changing consumer trends. As a result, such networking sites as Myspace and Facebook have become favorites for the marketers who are intent to tap the youthful consumers. Using the interface provided by the internet, various groups can congregate from all over the world over the cyberspace and advocate towards a common course.

For example, environmentalists, political activists, and other interests groups have taken advantage of the mobilization and the power of these new tools to achieve their objectives. Important leaders in history have understood and used the wisdom of the crowd to mobilize peoples’ power and support towards their courses. Some of these include Mahatma Gandhi, President Obama, and Fidel Castro who successfully got the masses behind their back either towards winning political power or promoting legislative support.

The book thesis is a sure reflection of what happens when like minded people meet to deliberate on a business plan. The resultant brainstorming leads to a formulation of well refined idea that contributes to the success of the business start ups. It goes without saying that when people are engaging at the same level they work better than when organized in a bureaucratic system where independence of mind is suppressed.

When the different perspectives and ideas are put together, better investment decisions are easily achieved. As a result this book points to the idea that business organizations should consider using democratic systems that allow independence of mind in decision making rather than bureaucratic systems that tend to alienate the ideas of the subordinates. A democratic environment creates an opportunity for integrating the diverse views of many knowledgeable people in making corporate decisions in an organization. As a result, the author strongly emphasizes on the value of collective judgment as opposed to the reliance on a single individual in arriving at key decisions in a company.

The book is targeted at professionals who tend to rely on their own insights in decision-making. In marketing, some business professionals rely on personal opinion in determining the success of the company products.

This is often inaccurate as in real sense it is the wisdom and the ideas of the masses that determine the actual success. In terms of the body of knowledge, it is an important contribution as it helps clear the misplaced notion that bureaucracy is the best system of governance. The book subscribes the Perspective Power school of thought, which argues that in a small group, people decisions are influenced by those of others due to the false fear that they may be more informed than them. However, in a bigger crowd of independent minded people, they tend to adapt to their diverse perspectives in thinking and action.

Summary of the chapters

The book opens with an illustration of the workings of the wisdom of the crowd by looking at the program called “who wants to be a millionaire”. The audience is asked to predict the likely outcome of the challenger disaster to the capital market. The chapter gives emphasis on the traits that characterize an informed crowd of people, which according to the author include possession of varied perspectives and independent mindedness. He explores the possibility of developing prediction markets as exemplified by Iowa Electronics Markets whose major activity consists of trading of probabilities in a similar way as stocks in the capital market (Surowiecki, 2004).

In the second chapter of the book, the author mainly dwells with the importance of diversity. He insists that if in a crowd you find a commonality of opinions all the time, the crowd must be abnormal. He uses an illustration of the commodity market, which is kept alive by continuous innovations and variety of marketing ideas.

According to Surowiecki (2004), diversity in a group setting helps to nurture various perspectives towards arriving at a solution within what he refers as a wise crowd. In the third chapter the author affirms the importance of independence of action and mind in a crowd. To him, uniformity of mentality is a recipe for group thinking, which diminishes the quality of decision making in a crowd. This group thinking occurs in a small group, which tends to exert individual opinion on each other leading to reaching of immature conclusions.

The fourth chapter deals with the benefits and limitation of decentralization. Decentralization works very well in a free market and is gaining prominence in the current corporate scenes where companies now prefer to operate with small self-organized teams. The working of the system allows independent of action and coordinated realization of results. In the fifth chapter, problems arising from coordination of action are analyzed.

These can be solved through central planning where key decisions are made by a single entity and then passed to the rest of the group for implementation. Another important mechanism of coordination is the market, which sets the price of commodities at the optimal level. Though not perfect as a result of lack of uniformity in access to information, markets help coordinate buyers and sellers in the market.

In the sixth chapter, cooperation takes the centre stage of discussion. Its success requires the crowd to work together towards the common good of the whole. The whole in this case may be a society or an organization. Human behavior is social and as a result, people will tend to practice some form of fairness. Large organizations are held together by the relationships that exist between reward and efforts. The last chapter also looks at the problems of coordination by examining the problem of traffic in London.

The book accomplishes this by scrutinizing congestion pricing as used in London to manage traffic in the city. The mode of pricing gives a free hand to motorists to make individual choices about accessing the downtown London but on the other hand slaps a direct cost on driving to the area at certain hours of the day. An optimal number of cars contribute to the smooth flow of vehicles while minimizing traffic jams. On the other hand, too few cars tend to over speed, start, stop, and slow down erratically causing traffic snarl-ups.

Strength of the book

The books greatest strength is its ability to infuse the theoretical framework with current issues facing the society in a clearly understandable manner. In a way he successfully applies organizational behavior and theories in economics though in an overt way to emphasize his theme. This increases its relevance in the modern day world. The author is also able to expertly employ his prowess in the topical issue to influence the discussion to his argument through the use of related illustrations that point to the issues being addressed in the book. The use of his analogies is very relevant in supporting his argument as seen in the analogy of the submarine.

When the submarine gets lost in the ocean and losses contact with the home base, it’s only through the use of a group of people who know about the ship and the likely course of it at the time of its disappearance that help in tracing the location of the ship at the ocean floor.

Weaknesses of the book

The major weakness of Surowiecki’s argument is that it is largely subjective and may not truly represent the real life situation. His ideas are mainly informed by personal opinion and lack any empirical support to ground the argument. It has been found that whenever people act in a crowd, individual rationality is replaced with collective rationality, which in itself is at times irrational. When people come together in a crowd, they lose their individual rationality and adopt the thinking of the crowd. This leads to making and implementation of irrational decisions, which might be detrimental to the well being of any business organization. As a result, I feel that he should have introduced this angle of thought in his book as much as he wanted to promote his own view.

Personal assessment of strengths and weaknesses of the book

Group judgments can be valuable tools in the making of business and investment decisions. Brilliant open-minded people come up with different perspectives as well smart inputs, which help in decision-making. However, in my opinion, it can only be applicable if the people are knowledgeable about the field in question and that the conditions allow for independent mindedness, which is often not possible in masses as a result of the mass influence. His use of the south sea bubble, Holland tulip bubble craze, and locating of the naval submarine analogies are only chosen strategically to provide back up to influence the readers opinions to his side of argument.


Surowiecki, J. (2004). The wisdom of crowds: why the many are smarter than the few and how collective wisdom shapes business, economies, societies, and nations. New York: Doubleday publishers.