Wisdom of Crowds: Decentralization

notes from Surowiecki, James. The Wisdom of Crowds. (Anchor: 2005).

Decentralization has been a central tenet of management theory for the past 20 or so years — self-management, self-organization, and social networks are all prized more and more.

Internet rises as the example of decentralized system (economic, organizational, etc)

Decentralization: “power does not fully reside in one central location, many important decisions are made by individuals based on their own local and specific knowledge rather than by an omniscient and farseeing manager.”

Decentralization fosters and is fed by specialization. Specialization “increases the scope and the diversity of the opinions and information in the system.”

Tacit knowledge: “knowledge that can’t be easily summarized or conveyed to others, because it is specific to a particular place or job or experience, but it is nonetheless tremendously valuable.” (Hayek)

Decentralization’s strength: “encourages independence and specialization on the one hand while still allowing people to coordinate their activities and solve difficult problems on the other.” Decentralization’s weakness; “there’s no guarantee that valuable information which is uncovered in one part of the system will find its way through the rest of the system.” So the balance to be struck is between making individual knowledge globally useful, while allowing it to remain specific and local (and thus valuable).

Linux — decentralized and thus diverse like a market in its ability to generate lots of alternatives and then winnow them down to the most efficient.

If a group of autonomous individuals tries to solve a problem without any means of putting their judgments together, then the best solution they can hope for is the solution that the smartest person in the group produces, and there’s no guarantee they’ll get that.

Aggregation is a kind of centralization, AND it is necessary for the success of decentralization. Confusing but true! Getting rid of central authority isn’t a panacea.

A post-9/11 congressional joint inquiry found that the US intelligence agencies didn’t properly foresee (and thus prevent) the terrorist attacks because of the agencies’ sheer number, decentralization, and disconnected nature. But we’ve just been talking so much about the benefits of decentralization! What’s the deal? Well, the US intelligence committee’s problem was not that it was decentralized, it’s that it was lacking in any means of aggregating information and judgments. “No mechanism to tap into the collective wisdom of NSA nerds, CIA spooks, and FBI agents.”


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