Information Cascades in the Real World
The theory behind this strategy is sound; groups are generally very accurate in terms of making the correct decision. The issue is this only works when people make completely independent decisions. Although individual decisions may be less informed without others’ information, the best group decisions are always made when people choose on their own.
ABC News did a study on why people follow crowds and came up with some interesting results. They held a test where an entire group of volunteers were told to orally report the same answer to a question (regardless of correctness) and one volunteer, Tony, was left to answer the question either based on his own answer or based on the answers reported before him. It turns out that Tony answered in agreeance with the group even if the answer was vacuously false. His initial answers gave him a score of 90%, but the orally reported answers he gave after hearing everyone else led to an actual score of 10% (“Follow the Crowd”). This is a perfect example of an information cascade gone wrong. It shows that in groups, people are more likely to blindly follow the information of others even if their own private information indicates otherwise. Looking at this experiment from the outside, it is easy to say that if put in Tony’s position, a different person might perform differently, when in fact, the human desire to conform will almost always take over. The basic explanation for this situation is that a person answers on his own, he is alone in being right, but there is also the chance that he is wrong and alone – something humans avoid at all costs. People would rather give the same answer as everyone even if they think it is wrong because they would rather be wrong with everyone (because there is no shame in that). Once again, we see how information cascades can influence decision-making in a negative way as people make decisions based on others’ information.