It's 2009 and we've seen the economy come pretty darn close to total collapse due to, what seems to me, was a mass delusion: house prices would rise forever, we would never have to save a penny and yet we could keep borrowing ourselves into total bliss.
What a surprise to turn on my TV last night and find "The Business of Innovation," hosted by Maria Bartiromo on CNBC . What I heard was a youngish and smart seeming man describing that -- given the right conditions -- crowds can make better decisions than their smartest members. It was James Surowiecki the author of The Wisdom of Crowds - Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations (and a financial writer for the New Yorker). One might have expected a discussion with the author of Extraordinary Popular Delusions and the Madness of Crowds but no because: 1) the author, Charles Mackay, is dead and 2) we all have the memory of a pea.
In truth it was an intriguing discussion. But, as with most things, the devil is in the details. Just as rational markets require all kinds of conditions that almost never coincide, the magic only happens when the crowd is a loose/tight network of diverse and independent thinkers. Seems to me the mob mind is the more likely outcome.
Tuesday, October 20, 2009
Subscribe to:
Posts (Atom)
