The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations

Decentralization is a key component to making crowds wise. However, this chapter begins with a counterexample, which shows how decentralization can actually hurt collective decision-making: US intelligence agencies like the Central Intelligence Agency (CIA), Federal Bureau of Investigation (FBI), National Security Agency, National Imagery and Mapping Agency, and Defense Intelligence Agency failed to account for some of the biggest terrorist attacks on the US, such as Pearl Harbor and 9/11, even though, in retrospect, there was evidence of planned attacks. These failures were thought to be due to the decentralized nature of these intelligence-gathering agencies. They would each gather information but did not coordinate or share their findings. Some experts think that they would benefit from centralization, such as the establishing of an overseeing institution.

This counterexample begs the following question: If the type of decentralization characterizing top US intelligence agencies was not appropriate, then what kind of decentralization would allow crowds to be wise? There are two clear ways in which decentralization encourages better decision-making and problem solving. First, it fosters specialization by encouraging people to invest their time and effort into a specific domain so that they are better equipped to handle problems in that field.