The most important lesson that James Surowiecki wants us to learn from his book, The Wisdom of Crowds, is to stop “chasing the expert”—that one person who we think has the right answer or most intelligent solution to a problem.  It’s a costly mistake, he says.  Instead, we should “ask the audience”, as was done with successful results on the TV show Who Wants to be a Millionaire.  In a world that’s always searching for the next great superhero (or super leader) to save the day, Surowiecki’s thesis is provocative and counterintuitive.

    The author defines the “crowd” of the title as any group that can “act collectively to solve problems or make decisions—even if the people in the group aren’t always aware that’s what they’re doing.”  A crowd can be a large company, a small team of people, or bettors on a horse race (who don’t know they’re a crowd).  Given the right conditions, he says, these “crowds” are often smarter than the most intelligent individual in them.  Even if the group is made up of people who are not especially smart or well informed, the group can still make collectively good decisions.

For groups to solve problems effectively or make good decisions, four conditions are necessary:
1. The crowd needs to be cognitively diverse.  Individuals in the group must have different perspectives, insight and pieces of information.
2. Individuals need to be able to make decisions independently of each other so that individual judgment errors don’t impact the group’s collective decision.
3. The group needs to operate in a decentralized environment in which its efforts aren’t directed from the top down.
4. There must be a way to aggregate individual ideas and opinions into one collective solution or decision.  One of the reasons the intelligence community was not able to anticipate and stop the 9/11 tragedy was that it lacked an effective means of tapping into the collective wisdom of various agencies such as the NSA, CIA and FBI.

    Surowiecki presents a dramatic example of a group whose decisions led to disaster because at least one of these conditions was missing:  NASA’s Mission Management Team, which concluded there was “no catastrophic damage” to the Columbia space shuttle, and even if there were such damage, the team could do nothing about it.  A few days after the team came to this conclusion, the Columbia disintegrated upon reentry, killing all on board.  Unfortunately, critics sometimes use examples such as this to argue against using groups to make any decisions.  However, Surowieki points out that the NASA team was missing, among other things, the diversity of opinion required to produce a decision that might have brought the crew back safely.

    Crowds are good at solving three kinds of problems, according to the author:  “cognition” problems, which have a right answer or definitive solution (for example, “Who will win the World Series this year?”); “coordination” problems such as how a company might organize its operations; and “cooperation” problems, which involve getting people to work together when self-interest would be more rational (for example, paying taxes).  Groups are not good for problems involving skill, such as flying a plane.

    Surowiecki cites several organizations that are beginning to tap into the collective wisdom of their employees to make critical decisions, rather than relying on the CEO or top management to have all the answers.  For example, one of Eli Lilly’s divisions has experimented with an internal employee decision market to predict whether new drugs will gain FDA approval.  The increased use by organizations of the crowd’s wisdom is encouraging, especially in light of many of the decisions made by company leaders during the 1990’s.

    However, the bad news, according to Surowiecki, is that the “command and control” model of running an organization, which concentrates power and knowledge in the hands of a few people at the top, “continues to exert a powerful hold on much of American business”.   He goes on to say that while information is not flowing down as it should; it’s also not going up the hierarchy either:  “Unless people know what the truth is, it’s unlikely they’ll make the right decisions.  This means being honest about performance.  It means being honest about what’s not happening.  It means being honest about expectations.  Unfortunately, there’s little evidence that this kind of sharing takes place.

    So, to have better decisions in organizations—and ultimately, better results—leaders need to abandon outdated notions about who has power and knowledge, get ride of the concept of the leader as all-knowing superhero, tell the truth themselves, and establish a climate in which others are encouraged to tell the emperor he or she has no clothes.  Although that’s a high expectation, “total leaders” are up to the challenge.  Only when leaders embrace their transformational role will the wisdom of the crowd flourish and our organizations and our world become better places.