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Three Cups of Cascades

http://www.youtube.com/watch?v=XhAb37yZ0o0

When CBS News broadcasted the above 60 Minutes segment on April 17, 2011 alleging inaccuracies in Greg Mortenson’s bestseller Three Cups of Tea, thousands of Americans who donated to Central Asia Institute (“CAI”), the charity co-founded by Mortenson to build schools for children (many of them girls) in remote regions of Pakistan and Afghanistan, must have felt angry, confused and betrayed.

The key allegations made by 60 Minutes included Mortenson lying about getting lost on the way down from K2 and stumbling into the village of Korphe and later being captured by the Taliban. The program also alleged that schools CAI claimed to have built either have not been built or have been built and abandoned, and the amount money CAI spent on advertising Mortenson’s books and paying the travel expenses of his speaking tours was excessive relative to comparable charities.

Many of these donors were moved by Mortenson’s heartwarming story to eradicate poverty and promote education for girls in Pakistan and Afghanistan after reading his book or attending one of his many lectures. But there were also many others who decided to donate purely based on their friends’ behavior without taking the time to familiarize themselves with the work of CAI or perform appropriate due diligence on the foundation’s claims. Even President Obama donated $100,000 to the group from the proceeds of his Nobel Prize.

Knowledge of information cascades helps us to understand that when people make decisions sequentially, with the later people watching the actions of earlier people, they would often infer something about what the earlier people know. In the case of Three Cups of Tea, the later donors might choose to disregard their own information (or lack of information) in favor of inferences based on the actions of earlier donors.

Regardless of whether the allegations contained in 60 Minutes are true or not, the lessons from information cascades apply here as well.

(i) Cascades can be wrong. A small number of initial supporters who donate to CAI are sufficient to start a cascade of donors, even though it might be the wrong choice for the group.

(ii) Cascades can be based on very little information. Word of mouth was probably what prompted many people to donate. It is highly unlikely that any of the donors bothered to verify the information contained in Mortenson’s book.

(iii) Cascades are fragile. The broadcast of this 60 Minutes program has caused many donors to question the integrity of Greg Mortenson and the work of CAI. A group of readers have filed a class action lawsuit for fraud against Mortenson, arguing that they bought the book under false pretenses.

Regardless of how this story unfolds, the key lesson to be drawn is not to rely too heavily on the action of crowds. Just because everyone is donating to a cause does not mean the cause is a good one worthy of our support. Using the same logic, just because everyone now seems to be ostracizing Mortenson after the 60 Minutes report does not mean that the allegations are true. Instead we need to take the time to gather all information available and make a decision on our own, instead of relying on crowds.

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