Information Cascades

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John Robb:

"Here's how an information cascade works:

1) An event occurs or a problem surfaces.

2) A person who is perceived to have good data/insight into the event or problem makes a decision.

3) Other people, observing the first person's decision, opt to avoid original analysis/discovery and copy the earlier decision.

4) The more people that copy the earlier decisions, the less likely any new discovery or analysis is done.

If the earliest decision was correct, then everything works out. If it isn't, the error is compounded until it becomes a major problem when it collapses. In today's world, with its copious communications systems, information cascades occur with increasing rapidity. They can spiral out of control in hours/days. This also means that on the flip side, an information cascade can collapse suddenly, when the original decision(s) is(are) proven wrong." (