The Modern Journalist

Book Review: The Wisdom of Crowds (Part 1)

Note: This is maybe the most important book I’ve read for my research. This review is going to be long and exhaustive. So, I’m breaking it up into multiple parts. Read Part 2 here.

I spent the day reading James Surowiecki’s The Wisdom of Crowds, one the books in my reading list and one of the books I’m using for research for my book.

Let me start by saying that everyone involved with newspapers, online media and technology should read this book. There’s not a direct application (other than mention of predictive markets), but — as I’ll discuss — the premise of the book lays out exactly the model for what newspapers should be doing online.

Let me explain: if our duty as an industry is to inform the public, then we should focus on the areas where the best decisions get made. As Surowiecki points out, that does not sit in the hands of the single-minded expert. In other words, what papers have been doing for years is simply reporting what this person said, and this person said. Which, when analyzed, by and large comes out to be a wildly inaccurate account of what is happening.

Which isn’t an indictment of the entire industry. There are good pieces here and there; however, Crowds examines exactly where and how data is deconstructed — which at the end of the day is what we do.

This review will be different, I think. I’ve made copious notes — and below I’ll lay out the passages next to my notes to hopefully build a cohesive newspaper centric analysis of the book.

What Makes a Market Work: There are four components to a market that need to be followed for it to deliver accurate information: diversity of opinion, independence from information sharing, decentralization and aggregation.

I’ve written about the 8 Rules to Build an Online Community, and this is a great addition to that. Slowly building the components to what every site needs to have. There are more descriptions of rules — outside the four components — which build upon the 8 Rules (rewards, punishments, ect). We’ll get to that.

Incentives Make all the Difference: People give better results when they have some incentive to participate; however, financial incentives aren’t the only draw. Incentive to “win” or “altruism” develop naturally and oftentimes have a more powerful draw. The lesson: it’s not necessarily expense driven.

Notes: If that’s the case, then newspapers should invest in predictive market tools with financial AND community incentives or develop business models around those markets for advertising and marketing partnerships.

In fact, newspapers should be using those models to not only flesh out facts in a story — or stories themselves — but as a way to extend the reach of the paper to figure out WHAT the stories are in a community.

Decisions Made By a Limited Pool of Experts are Mostly Wrong: “Grouping smart people together doesn’t work that well because the smart people (whatever that means) tend to resemble each other in what they can do.” (p30)

Notes: This is maybe the most important theme in the book. The science hammers this point: if you gather similar people together (say a management team at a newspaper) and have them make decisions about the future, they will oftentimes miss wildly because their backgrounds and expertise don’t cancel each other out. They feed on each other, which in turn shuts down and collaborative efforts because they are then framed in such a way as to return answers that the group has already decided upon.

I can’t help but remember my days in management meetings where decisions about how the company should move online would be structured, and then beating my head against the wall when I’d return to my office. I’ve seen the same thing happen at my talks. Without fail, the new media folks come up to me and thank me for telling their bosses that they need to expand their thinking.

I can’t emphasize enough the importance of this theme for those involved in newspapers. It’s uncomfortable, but well worth the read just for that.

More on Decisions: In speaking about experts in one area who made decisions in areas they weren’t expert in: “In other words, it wasn’t just that they were wrong; they also didn’t have any idea how wrong they were. And that seems to be the rule among experts.” (p32)

Notes: Expertise in one area doesn’t translate into another area; in fact, it is a tremendous hinderance, particularly if you are making decisions. In other words, what you know about how print works is no indicator that you understand how online works.

Effect of Lack of Diverse Thinking: “When the pressure to conform is at work, a person changes his opinion not becausee he actually believes something different but because it’s easier to change his opinion than to challenge the group.” (p38)

Notes: The fear is when a lack of diversity in thinking is taken as “the answer,” you begin to lose the ability as an institution to generate truly innovative ideas, which is the hallmark of a business (going back to the 1800s). If that happens, you are simply treading water as a business — and at some point, bound to lose market — because you believe you are acting correctly and thus have no need to change direction.

Don’t Share Information: When making a decision, it’s best for people to answer without knowing what other people are saying — otherwise, they end up, as discussed, self-moderating their opinions. The only way to reach a collective decision is to minimize the sharing (ahead of time) of information.

This also ensures that new ideas and information are presented. The more people share and commiserate, the less likely they are to make a wise decision. (pp40-43)

Notes: The newspaper industry, as I’ve advocated, needs to turn to people who aren’t in the field of journalism, but who understand how the Web and Internet work to deliver information to people — and then adjust that property accordingly. Simply replicating what has been done because of a survey of other newspapers or informational reader surveys almost promises failure because it doesn’t take new information into account.

On pages 43-50, Surowiecki discusses a study of football strategy — and why coaches don’t handle fourth down situations properly. His explanation: the limited diversity and fear of stepping “outside” the norm cause most coaches to make irrational decisions for rational reasons. A must read section of the book.

Using Best Practices is a Sure-Fire Way to Fail: “The fundamental problem with an information cascade is that after a certain point it becomes rational for people to stop paying attention to their own knowledge — their private information — and to start looking instead at the actions of others and imitate them.” (p54)

Notes: You begin to look at “what others do” as your starting point, supplanting your knowledge about your business thus creating a cascading effect where you are creating a product on a foundation you don’t understand because other people seem to be doing it; instead, you should focus on what you do and seek out diverse opinions on what your options are for success and define your best practices.