The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations

Imagine a bustling fairground in the early 1900s, where hundreds of people gather around a hefty ox placed on a scale. Each person, from farmers to clerks, places a wager on the ox's weight after slaughter and dressing. Their guesses, independently made and varied, come together to form a collective estimate that is almost perfect. This remarkable event shows us something profound: when a group of diverse individuals each makes an independent judgment, their combined wisdom can surpass even the smartest individual.

We often assume that experts hold the monopoly on correct answers, but evidence challenges this notion. In a popular game show, a studio audience of ordinary people answered questions correctly 91% of the time, while experts managed only 65%. This reveals that the collective voice, when properly harnessed, can be more accurate than isolated expertise.

This phenomenon rests on key pillars: diversity ensures a broad range of perspectives; independence prevents correlated mistakes; and aggregation turns many opinions into a single, powerful judgment. When these conditions align, errors cancel out, and the group's knowledge shines through.

These insights form the foundation for understanding how collective intelligence operates in the world around us, from markets to online platforms. As we journey forward, we'll explore how this wisdom manifests in solving complex problems, coordinating actions, and fostering cooperation.

Let us now move deeper into the forces that shape collective decisions, starting with the vital role of diversity.