I’m excited about a book I’ve begun reading entitled The Wisdom of Crowds. The Introduction explains in compelling terms both the reasons why the discussion board is potentially such a powerful communications medium and why it is only when reasonable posting rules are enforced in reasonable ways that this communications medium is able to achieve its potential.
Here’s the key claim put forward by James Surowiecki (the book’s author): “If you put together a big enough and diverse enough group of people and ask them to make decisions affecting matters of general interest, that group’s decisions will, over time, be intellectually [superior] to the isolated individual,” no matter how smart or well-informed he is. This is a counterintuitive claim. It seems as if there should be some individuals in a group who would be smarter than the group as a whole. And Surowiecki acknowledges that, in isolated cases, it is indeed so that there will be a small group of particularly well-informed community members who will arrive at better insights than the community as a whole. One cannot count on such individuals to do consistently better than the group, however. The collective insights are more reliably accurate, according to his argument.
If Surowiecki’s argument holds up, I see it as being the best explanation I have seen as to why the Financial Freedom Discussion-Board Community has been able to do such amazing work over the course of the first six years of its existence. I sometimes try to explain this by noting that aspiring early retirees have more motivation to save than most others, and suggest that, thus, it should not be such a surprise that our community includes a good number of the Greatest Savers in the World. The book The Wisdom of Crowds is saying that there is more to it than that. It is saying that we not only benefit from the insights of hundreds of the Greatest Savers in the World, we also benefit from the even more powerful insights generated when these great savers meet and talk things over and work things out together. It is this Learning Together experience that truly makes our community the most valuable resource for learning what it takes to win financial freedom early in life that exists today on Planet Earth.
I’ve long sensed that this was so. Back in the days when the community that exists today was just a glimmer in my eye, I had a feeling that all that I had learned from my personal research about the subject matter of this site was not enough to make all the pieces of the puzzle snap in tight. There was a missing element in my understanding of this stuff prior to December 1999, and it was the discussions held at the Motley Fool board during its Golden Age that turned the lights on for me re what works with saving, and then the discussions held at a number of our boards during The Great Safe Withdrawal Rate Debate that turned the lights on for me re what works with investing.
There were individual community members who shined during these discussions, of course. But it was the collective Learning Together experience that really made things click in a satisfactory way. I am inclined to agree with Surowiecki that there really is a wisdom of crowds.
Why is it then that, prior to publication of Surowiecki’s book, it was only The Madness of Crowds (a phrase taken from the title of a book by Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds) that we heard about? Surowiecki explains that crowds do not always generate the amazing insights that they are capable of generating when conditions are right: “Groups generally need rules to maintain order and coherence, and when they’re missing or malfunctioning, the result is trouble.” James Surowiecki, meet John Greaney! (Greaney is the owner of the RetireEarlyHomePage.com web site, and by far the most abusive poster we have seen in the history of our small [but quickly growing!] movement.)
“Mackay was right about the extremes of collective behavior: there are times–think of a riot, or a stock-market bubble—when aggregating individual decisions produces a collective decision that is utterly irrational. The stories of these kinds of mistakes are negative proofs of this book’s argument, underscoring the importance to good decision making of diversity and independence by demonstrating what happens when they’re missing. Diversity and independence are important because the best collective decisions are the product of disagreement and contest, not consensus or compromise. An intelligent group, especially when confronted with cognition problems, does not ask its members to modify their positions in order to let the group reach a decision everyone can be happy with. Instead, it figures out how to use mechanisms–like market prices, or intelligent voting systems–to aggregate and produce collective judgments that represent not what any one person in the group thinks but rather, in some sense what they all think.” That’s James Surowiecki speaking.
Thats smart stuff. This guy is telling us something important about how we need to handle abusive posters if we are to help our community achieve its full potential in days to come. The Campaign of Terror is an anti-community initiative. The Campaign of Terror continues not because a large number of community members endorses it. It continues because, while most community members join our discussions to learn about the subject matter of the boards, most do not know how to go about dealing with a poster as abusive as John Greaney. The average community member looks to site owners and board leaders to take care of problems of this sort. Our community is wise, and has demonstrated its wisdom in its many expressions of its desire that the Greaney matter be brought to an end. It is our site owners and board leaders who have let us down in recent years.
The blame for our troubles is better attributed to the madness of individuals who have so far lacked the courage to carry out their responsibilities than to the madness of crowds. We have indeed seen what the madness of crowds looks like up close, but only because those who are responsible for steering the boat through troubled waters became too fearful of what would be said of them by a bad element if they made the turns to the wheel that their common sense told them had to be made. That’s my take (and James Surowiecki’s too, it seems to me).