THE WISDOM of CROWDS by James Surowiecki for Dummies
1. The Wisdom of the Gasoline-Powered Car
In the first decade of the 20th century, a third of all the cars on U.S. roads were electric-powered. Steam-powered vehicles were also common. As the decade wore on, however, gasoline-powered cars, through the wisdom of The Market, won out, so that today Americans have made the choice for the most polluting and most environmentally destructive option of private transportation possible. The gasoline-powered car has also made possible the Wisdom of the Suburb and the Wisdom of the Traffic Jam. A tiny elite of government “experts” could have planned it differently. But fortunately, the Wisdom of the Crowd won out, making oil stocks the great investment they are today.
2. The Wisdom of Restaurants
In an experiment done in Iowa City in the early 1980s, Professor Stetson Greykirk of Iowa State University selected a random crowd of his undergraduate students. Two restaurants had recently opened up in the neighborhood – the objectively better choice, run by a Harvard M.B.A., serving steaks and chicken, and a Thai restaurant, run by illegal immigrants from Chiang Mai in the Golden Triangle. Professor Greykirk handed out free coupons to his class and observed which eatery the students preferred. Interestingly, the smarter students (those with combined SAT scores of over 1400) chose the Thai restaurant, while most of the group chose the objectively better restaurant. After dining out, 60% of the sample went to a bar and 37% went bowling.
3. The Wisdom of the Pentagon
On February 13, 2002 Former Admiral John Poindexter, who had been convicted of conspiracy, lying to Congress, and destroying evidence in the Iran-Contra affair, was appointed as director of the Pentagon’s Total Information Awareness Office. His office devised a probabilistic betting market to deal with futures on assassinations of heads of state around the world. For example, investors could bet that there was an 80% possibility that the Canadian prime minister would be toppled by the CIA by April. Despite the proven effectiveness of such betting markets in the world of sports and Hollywood, Poindexter was forced to resign by some goody-goody self-appointed experts in Congress before the market really had a chance to get off the ground.
4. The Wisdom of the Stock Market
In 1936 the famous economist John Maynard Keynes compared the stock market to the beauty contest, in which investors bet on who is the prettiest girl. Although Keynes was a Communist, after Richard Nixon said “We’re all Keynesians now”, history has borne out his logic. In a study by Iowa State University Professor Stetson Greykirk, male undergraduates picked out the objectively prettiest girl time after time. Likewise the stock market is a pretty good bet, as is borne out by the fact of the triumph of The Market and the American Way in our world today. Of course there will always be ups and downs, bubbles and crashes, winners and sore losers but the history of the 20th century has shown pretty damn definitively that The Market is the best way of running things at home and abroad. For example, whenever you go into your local store, your orange juice will always be there! At least if you live in Iowa. Amazing! Also, the Wisdom of Television has evolved to a point where every right thinking American can watch “Who Wants to Be a Millionaire?”, CNBC, and the Amish Reality Show in the privacy of their own living room. In fact, The Market has worked so efficiently that the average American now has a TV set in not only their living room, but also in the kitchen, bedroom, bathroom and even in the front seat of their gasoline-powered car, so they can watch TV while they’re stuck in traffic jams! Pretty brilliant, innit?
The Wisdom of Acknowledgments
First, I want to thank my boss who pays my salary every month and gives me stock options in The New Yorker.
My editor, Jeremy Ramsbottom, edited my first columns and gave me ideas of what to write when I suffered from “writer’s cramp.”
Thanks also to my staff of objectively pretty young interns, who not only fact-check my columns, but edit every word I write and look things up in the dictionary when I get stuck.
I also want to thank my personal money-manager, who’s going to get me in at the ground level when the Google IPO balloon goes up.
Also, my special “muse” Meghan O’Rourke, who gives me ideas of what to write about when I get stuck, and gives me suggestions everyday so I can turn out my column. I’d be lost without her.
My psychoanalyst, who keeps me stoked to the gills with Prozac, Xanax and methamphetamine when I get too “down” to write or need new ideas.
My copy-editor, who writes every other word that I write, runs the spell-checker for me, and helps me come up with new ideas.
And finally, to mumsy and daddy, who had the wisdom to send me to Choate, and also to Yale University for giving me the chance to teach American History, which, as time has shown, is just the bestest history of them all.
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