Smart Herds vs. Dumb Herds
I'm all for smart herds, freely choosing their happiness. They make everyone better off.
Financial markets work as smart herds when three conditions are met:
- Diversity of opinion - each person should have some private information
- Independence - people's opinions are not determined by the opinions of those around them
- Decentralization - people are able to draw on their own knowledge instead of being fed information from the top down, or by so-called "authorities"
When markets have these conditions satisfied, they work great. They generate a lot of alternatives and then winnow things down to the best ones. We wouldn't have this hobby without the free market.
Financial markets satisfy these conditions because participants have different amounts of capital, different risk tolerances, different time horizons, different investment styles, and different information sources. This diversity creates a system that generally works remarkably well.
The same holds for audio, I believe, based on extensive observations of the hobby.
But the audio herd isn't a smart one. I've watched too many audiophile friends follow the herd and make uninformed decisions.
Many end up unhappy when they don't diligently choose their own path. They spend serious money but never achieve the satisfaction they're chasing.
And here's what matters beyond individual unhappiness:
herd behavior skews the marketplace. When the crowd mindlessly concentrates on a few brands, excellent manufacturers who don't benefit from the same herd effects get overlooked. This reduces diversity and innovation, making the hobby poorer for all of us.
Here's key evidence that herd effects, not just quality, drive market dominance: If product quality alone determined success, we'd see more even distribution across the many excellent manufacturers. Instead, we see extreme concentration around a few brands.
Wilson Audio has effectively won the war to become the industry leader—not necessarily because they make objectively superior speakers, but because psychological factors created a self-reinforcing cycle of dominance. This concentration pattern is the signature of herd behavior, not objective quality differences. If Wilson were simply "best for most people," we wouldn't see experienced audiophiles often migrating to more exotic brands as they mature in the hobby. The migration pattern itself reveals that Wilson's industry leadership position reflects market dynamics and psychological factors, not universal superiority.
When the Audio Market Actually Works
This is crucial:
smart crowds absolutely work when the conditions are met. And we have proof of it right here on this site.
Look at Ron, Bonzo, and KeithR during their documented searches. These searches are textbook examples of how the wisdom of crowds creates better outcomes.
What made their process work?
Diversity of opinion: They explored genuinely diverse alternatives—not just Wilson vs. Magico, but speakers representing fundamentally different design philosophies and sonic signatures. They gathered information from multiple sources with different perspectives and experiences.
Independence: They made their own assessments through direct listening. Yes, they solicited input, but they weren't simply idiotically copying what others owned. They were forming their own judgments and using others' experiences as data points, not directives.
Decentralization: They drew on their own extensive listening experience and knowledge. They weren't waiting for Stereophile and The Analytical Sound to tell them what to think. They aggregated information from many sources—this forum, dealers, manufacturers, their own ears—rather than relying on top-down authority.
And here's the key: They shared their process online, especially on this site, where there's genuine cognitive diversity and many experienced people with different tastes, different systems, different priorities. This created a smart crowd.
The forum members weren't saying "buy this brand." They were sharing their experiences with different gear, discussing trade-offs honestly, challenging assumptions, and providing diverse perspectives. Ron, Bonzo, and KeithR could aggregate this information while maintaining their independence.