Digital Maoism

This is perhaps the most brilliant article I've read in a while. It elucidates both the danger and the power of the "wisdom" of the crowd.

The collective isn't always stupid. In some special cases the collective can be brilliant. For instance, there's a demonstrative ritual often presented to incoming students at business schools. In one version of the ritual, a large jar of jellybeans is placed in the front of a classroom. Each student guesses how many beans there are. While the guesses vary widely, the average is usually accurate to an uncanny degree.

This is an example of the special kind of intelligence offered by a collective. It is that peculiar trait that has been celebrated as the "Wisdom of Crowds," though I think the word "wisdom" is misleading. It is part of what makes Adam Smith's Invisible Hand clever, and is connected to the reasons Google's page rank algorithms work. It was long ago adapted to futurism, where it was known as the Delphi technique. The phenomenon is real, and immensely useful.

But it is not infinitely useful. The collective can be stupid, too. Witness tulip crazes and stock bubbles. Hysteria over fictitious satanic cult child abductions. Y2K mania.

The reason the collective can be valuable is precisely that its peaks of intelligence and stupidity are not the same as the ones usually displayed by individuals. Both kinds of intelligence are essential.

What makes a market work, for instance, is the marriage of collective and individual intelligence. A marketplace can't exist only on the basis of having prices determined by competition. It also needs entrepreneurs to come up with the products that are competing in the first place.

In other words, clever individuals, the heroes of the marketplace, ask the questions which are answered by collective behavior. They put the jellybeans in the jar.

- Jaron Lanier