Rob at Businesspundit has a smart essay on the "widsom-of-crowds-hype".

"Crowds are good at determining what is popular, which is really a tautology since popularity = what the crowd likes. Crowds are also good at guessing things that have a high randomness component, but that is about all. If crowds are so smart, why were there books written long ago about their madness? It's because when it comes to actual knowledge, they are usually wrong.

Think about this - the crowd would say that evolution is false. Does that matter? No, because most of the crowd doesn't know the difference between a genotype and a phenotype. If you don't know basic biology then your opinion on evolution is irrelevant. Outside of the most basic knowledge, experts still matter. Niche groups know important things that crowds never will.

Entrepreneurs need to realize that niche knowledge adds more value than crowd knowledge. Niche knowledge solves difficult problems. Crowd knowledge tells you about trends, but trends are fleeting. Niches are less about trends and more about vision - they are about what is possible, not what is popular. Experts studying something in depth can see opportunities that crowds will never see. All kinds of companies that are currently in niche industries like areas of nanotechnology, AI, neuroscience, biotech, etc. will be mainstream Fortune 1000 companies some day.

We like to be liked, and breadth helps (and some breadth of knowledge is important). The truth though is that breadth helps you sound smart, but depth helps you be smart. And I think we are sacrificing breadth for depth these days."

I'm almost through with the "Wisdom of Crowds" book and the book has two sides indeed - besides the smart crowds it also shows how crowds often make dumb decisions.

Rob's argument is more about what entreprenuers should do in order to exploid niches. Niches are by definition away from the crowd in that is where the money is.

Read the whole thing it is an exceptional good piece!