Understanding the crowd: Individually irrational acts often end up delivering collectively rational outcomes

BACK OF THE BOOK

Normally, crowds are crowds. They're normal. They evoke the statistical image of the Bell Curve, with its ring of 'average', rather than aura of wisdom. Entertainment whizkids often complain the most bitterly about the crowds that make up the 'mass market'. A loopy Kylie music video goes nowhere trying to 'kaleidoscope' our sensory imprint of time progressing along a single linear path, but one of India's first stockmarket-funded productions rakes in millions turning cinematographic demonisation into pornographic violence. Wisdom of the multitudes?

Yet, and yet, everybody is better off if the throngs of the market endure as surely as democracy. The market is good. After all, melodious cinema sells mostly on genuine love, hearts do beat warmly in the swarms around ballot boxes, and none of this is the outcome of mass stupidity. This book, by The New Yorker columnist James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few, uses fascinating studies in behavioural economics et al to make a strong case for collective intelligence. Many heads, he says, make more sense than a few-even if the latter are all geniuses. Google serves web pages ranked by popularity, and it is just what you need. So trust mass opinion.

THE WISDOM OF CROWDS By James Surowiecki Little, Brown PP: 295 Price: Rs 1437	IN PRAISE OF PREJUDICE By John Stuart Roli Books (with The Subhas Ghosal Foundation) PP: 52 Price: Rs 95

At first glance, this other book, In Praise Of Prejudice, offers a contrary argument: in favour of individual insight taking precedence over market research. Its author John Stewart, a JWT adman, opposes the attitude of 'The answer is we'll have to ask consumers; now what was the question?' Thus does he sell 'prejudice', defined benignly as an intuitive bias, as the very source of all breakthrough ideas, be it a scientific hypothesis or market-shaping brand. Apple and L'Oreal are brands made of individual judgment and coherent values (thus, of 'bias'), not market dictation. So: in what way does the rabble really know better?

Ah, the answer is in the details. Surowiecki's book is nicely nuanced; he does not exalt the market as some mystical know-all entity. And this, indeed, is the book's power. He cites Vernon Smith's famous lab experiment that saw prices converge to optimal points even in a market full of participants of varying silliness and ignorance. He even explores how "individually irrational" acts often deliver a "collectively rational" outcome: as in the 'ultimatum game', where people in test situations opt for an equitable division of the pie even though they have the power to hog most. Left to itself, the market works-even if in the oddest of ways.

But that's not the point. Surowiecki also worries about instances of market failure arising from 'groupthink', peer influence and mob hysteria. Crowds, you see, are smart only when characterised by diversity and independence of opinion, and that too only when they operate in a system that is decentralised but still unified by a mechanism to aggregate information. "Paradoxically," he writes, "the best way for a group to be smart is for each person in it to think and act as independently as possible." Yes, ideas often come from individual quirkiness-so varied perspectives are invaluable. But these, the book contends, are easier to get in the chaos of a bustling free-to-enter market, than from among a select group of 'experts'. Moreover, the task of picking winners from a variety of ideas-once generated-is still better left to the collective mind of many market participants.

Suroweicki writes with dispassionate clarity, betraying no more 'prejudice' than his belief in the market. The disappointment, however, is that his espousal of democracy is not nearly as persuasive. Maybe the experimental resources are poor. Perhaps democracy is easier sold as a consensus-seeking mechanism instead of a majority-rule thing. As something that stimulates thoughts on what all must not assume utterly undefiable authority. As something that's calibrated finely enough to distill the mind of the entire market. Something sensitive enough to value small shifts in opinion as well.

J.R.D. TATA KEYNOTE Edited by S.A. Sabavala And R.M. Lala Rupa & Co. PP: 214 Price: Rs 295

Never once has a prime minister asked me what I thought of the economic policy of the country," was the man's enduring heartbreak. A man who needs no introduction: JRD, or Jehangir Ratanji Dadabhoy Tata, born a century ago, and who lived just long enough to see India-at long last-adopt free market reforms. This book of speeches features his views. It also features the 'Mixed Economy' of the 1944 Bombay Plan; Tata fought hard to keep it from ending up as a 'mixed-up' economy. "...a high rate of growth is an essential but not a sufficient condition of social justice," he said in 1972, before arguing for faster growth to tackle poverty. The most endearing part is the section titled The Song Of The Clouds. You guessed it: his "greatest love". Flying, a lifelong affair that started in the 1930s, involving a Gaza tryst in a Gypsy moth and a Karachi-Bombay flight in a Puss Moth, and one that kept the flame alight through the aviation era: even after his tearful ejection from Air-India in 1977.

PASSION TO WIN By Abad Ahmad and O.P. Chopra Excel Books PP: 322 Price: Rs 250

In today's ever-changing global corporate world, time is becoming a scarce resource. This exemplary book enables the reader to quickly grasp and apply the tenets of leadership. The case studies and research, conducted by the All India Management Association (AIMA), along with strategic models, make immense sense in the Indian context.

The authors, both of whom are former deans of Delhi University's Faculty of Management Studies (FMS), have taken pains to go into details of diverse companies to give practical lessons. The five-i Framework (Inspiring Leadership, Innovative Strategy, Identity, Implementation, Internal and External Relationships) is, in fact, valid for global companies also. The takeaways from this book are of enormous value, and can be related to and applied by any leadership organisation. It is also of value to consultants and advisors, as the research gives rare insights into leadership organisations and their leaders. Developing a sustainable competitive edge comes across as the clear mandate for the long-term success of corporations.

The book is well-structured, and an effort is made to detail the concepts through examples. It looks at both internal and external stakeholders, and gives a direction on the importance of each, and what could be done to balance the value provided to different stakeholders. The book, a must-read, is practically summed up in the chapter titled Learning and Action Implications.

-Ajay Gupta