“If you watch an ant try to accomplish something, you’ll be
impressed by how inept it is,” said Stanford biologist Deborah
Gordon in a National Geographic article about swarm theory.
“Ants aren’t smart…ant colonies are.” If you’re familiar with
the ideas behind the wisdom of crowds and swarm intelligence,
you’re probably nodding knowingly. Under the right conditions,
groups—whether ant colonies, markets, or corporations—can be
smarter than any of their members. In these complex adaptive
systems, hard-to-predict behaviors emerge from the interaction
of the individuals. Executives make three common mistakes that
show they don’t really grasp how such systems work. What they
miss is that you can’t understand the behavior of a complex
system, let alone manage it, by analyzing a few key individuals.
First, managers extrapolate individual behavior to explain
collective behavior. Early in my career as an equity research
analyst on Wall Street, I was told that earnings per share is
the key to a company’s stock price.