It is majority rules, but I think that people are pretty reasonable when they actually get some kind of responsibility. In the modern system, everyone is hands-off. They vote maybe three times a year, check off a party name, and then proceed to complain about the government. Under direct democracy, only people who are willing to have some level of actual understanding (not just parties) are going to vote regularly, and these people are the most qualifiied to vote.
Direct democracy is great for societies that are 1) well-educated and 2) really tolerant (I'd think that these things correlate pretty well). Under these circumstances, the majority opinion is bound to be one that is based on sound logic. America is getting to this point, slowly. There's still a fair bit of racism, sexism, religionism, etc., but these things become weaker all the time.