Bestsellers are often disappointments. They promise a great deal fascination, revolutions in our thinking, entertainment. But they almost invariably under-deliver. When skimming through the pages of Thomas Friedman’s tome the Lexus and the Olive Tree he’s got a new one out which I’m glad of if only for this hilarious but somewhat laboured attack on it* I came up with what I call my holographic theory of the bestseller. Read a couple of pages at random and you know all you need to know about the bestseller.
This certainly works for Friedman in fact I’m so confident of it that I never did read the rest of the Lexus and the Olive Tree. I tried, but the theory somehow overtook me when trying to test it every time I tried to read more than two pages I just couldn’t go on.
In any event here is a review (or a brief discussion) of three bestsellers.
The first is called “Everything Bad Is Good For You“. I came across this when I was looking at the Demos website and saw a lecture of the same name. The author had dreamt this thesis up when observing that people just keep getting smarter (there’s good evidence for this) and he’s decided that all those things that people object to television, computer games etc are cognitively enriching and are helping drive this phenomenon. There may be some truth in this in fact it seems very likely. But I’m afraid I detected a kind of affected pose in the presentation of the idea.
I’ve somehow subjected this bestseller (I think its a wannabe bestseller actually but I don’t know) to an even more corrosive skepticism than my holographic theory of the bestseller. Its got pop culture and a cheeky little thesis without being too serious. A good formulaic try for a bestseller. On a quick Googling I decided that the discussion was not going to get much past the idea. If any readers can set me straight I promise to read a bit more of it. But I expect the a review which I Googled up and did read will be enough for me.
As an aside, Demos are an irritating lot: Interesting, often shallow and sufficiently disorganised that the e-mails which their website encourages one to send to them remain almost invariably unanswered (There is another explanation with which I can sympathise which is that my emails do not merit a response.)
My brother gave me Steve Levitt’s “Freakonomics“ for my birthday and I was very impressed by the symposium they did on it over at Crooked Timber. I really liked the humility of Levitt in his response and I commented on Troppo on how good this all was.
Having read the book however, I found it pretty unsatisfying. I don’t object (or didn’t think I objected) to a book without a unifying theme. In fact I like the idea. But I didn’t find the examples of Levitt’s research in the book all that riveting. Some of them are certainly both different and interesting. But they don’t usually amount to much. Knowing that Levitt has shown that Sumo wrestlers win a larger share of the bouts that really matter to their careers isn’t that interesting, nor that real estate agents just try to get a sale rather than the best price.
In the case of the real estate agents the methodology Levitt came up with to show the phenomenon was clever (comparing the prices real estate agents achieve compared with the price they achieve when selling their own house). But that wasn’t true of his test of the Sumo wrestlers. It wasn’t really even true of his test of the teachers who cheated on their students’ tests, though it was entertaining to read of his catching them out and I’m not saying that anyone could have done it. Levitt no doubt showed admirable flair as an intellectual entrepreneur in being in the right place (or getting himself into the right place) at the right time.
Levitt got hold of – was given – the ‘books’ of a crack cocaine ring which sounded interesting. Certainly the story of the gang was interesting and it was of interest to be told that they had a structure more or less like McDonalds but then I guess they would wouldn’t they with rates of return falling as one made one’s way down the pyramid? The other thesis for which Levitt is famous is that of abortion and crime. It’s interesting. But I wasn’t ‘turned on’ by the ideological naughtiness of the finding. It was just an interesting finding, and (as I presume Levitt would agree) it does not of itself lead to conclusion’s for or against abortion. So in the end I didn’t find it that interesting.
If I ask why I don’t find it that interesting, since it is important, I guess it’s because its a quirky fact. While, as I said I welcome a book that doesn’t worry about the notion that it needs a ‘unifying theme’ this factoid that Levitt has come up with is not really connected to anything. It doesn’t take my thinking anywhere.
If all this is coming across as unduly curmudgeonly, perhaps I can redeem myself a little with a rave review of James Suroweicki’s The Wisdom of Crowds. It followed the bestseller formula which is to say that it did read a bit like “the book of the long article” like so many bestsellers are. And it was careful to avoid dense theoretical exegesis and chock full of all those fascinating stories that editors love (I guess because readers do).
But I think The Wisdom of Crowds does something really grand. It does nothing less than propose a powerful new way of looking at our economy (mainly) and also our society. Perhaps some of the ideas have been put before, indeed it would be surprising if they had not been. Perhaps they have all been put together before as well as Suroweicki has done so here, but if so I’ve not come across it.
Just like Adam Smith gave us a new lens to look at the world, so too does Suroweicki. The idea is simplicity itself. That in the right circumstances, groups of people make really really good decisions and much better decisions even than their most intelligent members. This is a pretty big idea when you think about it full of implications for our lives, and for how we run things. And its one of those ideas that’s obvious when stated baldly something that we knew already, but had not articulated very boldly.
The classic example is guessing the number of jellybeans in a bottle, or as in the anecdote that begins the book, the weight of an ox. The average of a large number of people’s guesses is frequently not just more accurate than any of the group, but often really astonishingly accurate.
The types of problems that groups of people solve often better than individuals are those of cognition, coordination and cooperation. And the conditions that are required for groups to be wise are:
a) Diversity of opinion and cognition
b) Independence from one another (crowds are stupid when there is too much influence between their members as with the irrational exuberance (pessimism) of a speculative boom (bust).
d) A sound method of aggregating opinions.
I won’t elaborate on this further as there is a good concise review of the guts of the theory being proposed here.
The implication that has made the greatest impact amongst economists is the idea that ‘cognitive markets’ (my phrase) particularly betting markets for sports, and election outcomes etc but also financial markets, embody the wisdom of the crowd because they (usually) satisfy the criteria for a wise crowd. (As an aside the framework gives Suroweicki a way of defending the ‘efficient markets’ hypothesis – not on the gounds that markets are perfectly efficient against a neoclassical ideal, but on the grounds that the Austrians would argue that they are – at least given the right conditions – practically efficient. They aggregate imperfect information as well as practically possible).
This is well and good. However I was more excited by the fact that this checklist of things you need to have a wise crowd is as good a management handbook as one can have for everything from a market or a firm to a polity. Loose, not very prescriptive, but powerfully insightful about what can go right and wrong within groups of people making decisions. Chapter 9 is gripping. In it the transcripts of meetings that sealed the fate of the Space Shuttle are dissected for the ways in which they illustrate a small group violating certain requirements of a wise group, namely the foreclosure of cognitive diversity. Email me at nicholas AT gruen DOT com DOT au for a copy.
I was also excited about the hints that the book throws out about something that interests me which is what I call the ‘high morale economy’ which itself should be a major building block of the high morale society the way in which productivity and the engagement of workers (their intrinsic motivation in the psych jargon) often go together and the idea that where we think we can effectively do so, there is little more worthy in economics than helping bring them together. Adam Smith would have agreed.
Sadly the publisher has not allowed the book to qualify for even the ‘look inside the book’ let alone ‘search inside the book’ on Amazon. More sadly for me, I held out on the galling $50 retail price tag for the book in Australia on the grounds that it was sure to be released in paperback. I relented after about four months, whereupon hefty piles of the book in paperback promptly appeared in Readings in Carlton. No doubt if I had consulted and taken sufficient note of a sufficient number of advisors, I would have come to a better decision. You don’t need to bother. Go out and get the book.
PS I’ve just checked Amazon and it IS available for search inside the book. It wasn’t when I bought the hardback. If I’d have known that I could have held out longer :(
*Thanks to Jason Soon