The Despair, Inc demotivational poster for Meetings says:
None of us is as dumb as all of us.
James Surowecki says in The Wisdom of Crowds, ok, yeah, maybe sometimes that's true, but not always. And, in fact, particularly in large, independent groups, the many are way smarter than the individual expert:
At 11:38 AM on January 28, 1986, the space shuttle Challenger lifted off from its launch pad at Cape Canaveral. Seventy-four seconds later, it was ten miles high and rising. Then it blew up. The launch was televised, so news of the accident spread quickly. Eight minutes after the explosion, the first story hit the Dow Jones News Wire.
The stock market did not pause to mourn. Within minutes, investors started dumping the stocks of the four major contractors who had participated in the Challenger launch: Rockwell International, which built the shuttle and its main engines; Lockheed, which managed ground support; Martin Marietta, which manufactured the ships external fuel tank; and Morton Thiokol, which built the solid-fuel booster rocket. Twenty-one minutes after the explosion, Lockheed's stock was down 5 percent, Martin Marietta's was down 3 percent, and Rockwell was down 6 percent.
Morton Thiokol's stock was hit hardest of all. As the finance professors, Michael T. Maloney and J. Harold Mulherin, report in their fascinating study of the market's reaction to the Challenger disaster, so many investors were trying to sell Thiokol stock and so few people were interested in buying it that a trading halt was called almost immediately. When the stock started trading again, almost an hour after the explosion, it was down 6 percent. By the end of the day, its decline had almost doubled, so that at market close, Thiokol's stock was down nearly 12 percent. By contrast, the stocks of the three other firms started to creep back up, and by the end of the day their value had fallen only around 3 percent.
What this means is that the stock market had, almost immediately, labeled Morton Thiokol as the company that was responsible for the Challenger disaster....As Maloney and Mulherin point out, though, on the day of the disaster there were no public comments singling out Thiokol as the guilty party....Savvy insiders alone did not cause that first-day drop in Thiokol's price. It was all those investors--most of them relatively uninformed--who simply refused to buy the stock.
He goes on to say:
The market was smart that day because it satisfied the four conditions that characterize wise crowds: diversity of opinion (each person should have some private information, even if it's just an eccentric interpretation of known facts), independence (people's opinions are not determined by the opinions of those around them), decentralization (people are able to specialize and draw on local knowledge); and aggregation (some mechanism exists for turning private judgments into a collective decision).
This afternoon, I happened to turn on the television and Twelve Angry Men was playing on (I think) Turner Classic Movies. Twelve Angry Men is one of my great favorite movies. It's about justice and doing what's right and the transcendence of ordinary people. Plus, it has great speeches just littered all through it. It's also a classic example of the wisdom of crowds. One of the things I noticed this time through--maybe because I'd just finished reading The Wisdom of Crowds is how much depends on the different experience and knowledge of the men in the room--the old man(Joseph Sweeney) knows what it's like to be a forgotten old man, Jack Klugman knows how to use a switchblade, Henry Fonda used to live next to the El. They were poor men and immigrants and business men and laborers. They each brought knowledge with them that others didn't bring. They each observed different things in the courtroom, they each had different prejudices (which meant that their prejudices would be questioned, not just taken for granted.
They were diverse. They were independent--they had never met before their jury duty and they didn't even know each other's names until Henry Fonda and Joseph Sweeney introduce themselves as they're leaving the courthouse. Henry Fonda broke them out of 'groupthink' and gave them the opportunity to bring their special knowledge to bear on the situation. And they were locked in a room until they came to an agreement--making aggregation a necessity.
