Key Points

The thesis of the book, as the author states at the beginning:

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.

Summary

Part I

Chapter 1

The book begins with a series of examples of “crowd wisdom”, ranging from the TV show “Who Wants to be a Millionaire?” and its “ask the audience”, to the stock market indicating the company most likely to be at fault hours after the Challenger disaster. These cases all demonstrate the four conditions that comprise wise crowds - independence, diversity of opinion, decentralization, and a way to aggregate the results. Similar results are to be found in sports betting, and in Google’s results, determined by examining the number of links pointing to any given page. One way to take advantage of this wisdom of crowds is through the use of ”prediction markets”, such as the Iowa Electronic Markets, where people buy and sell probabilities as if they were stocks. In the right circumstances, prediction markets are an excellent way of turning the knowledge of many people into reasonably accurate predictions.

Links

The book’s web site: http://www.randomhouse.com/features/wisdomofcrowds/

Wikipedia page on the book: http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds