An interesting idea, but taken literally, it implies that any crowd larger than 22,500 people (150^2) has genius-level intelligence, which is kind of laughable.
The lower boundary of the 99 percentile goes up as 1/sqrt(N) and approaches the average member intelligence, but never reaches that level. At the same time, the upper boundary of the 99 percentile goes down at the same speed. However the number of super smart members, with IQ higher than say 160, grows linearly.
I agree completely, and I doubt Pratchett conducted much research to derive that algorithm. He might even be wrong about the constant factor at lower levels.