Technology Enables Information Cascades
As evidenced by the article on the economist, with new technology, information cascades are a more common occurrence than ever. Social networking sites connect more people than would stay in contact if left to old fashioned devices such as snail mail or phone calls or even texts. This means that more channels of information is available, but it also means that more people are likely to see one person’s decision to say adopt a new technology, or buy a new song on itunes. This means you are more likely to get signals from people about their behavior that will influence your own behavior. For example, say you see one person posted about how much they loved this new book. Another person has seen this and buys it as well. You see that two people have purchased the book so you decide it is worth while and go out and purchase it. Now multiple people are going to see people are liking this book, and more and more people are buying it, making this books popularity increase because it was popular (circular, I know). Since in social networks people are connected to acquaintances and not just close friends, a wider range of people will see the popularity of this book, and purchase it creating an information cascade that spreads throughout a population, not just a group of similar people. The more something shows up in something like your news-feed on Facebook, the more likely you are to check it out.
Not only are you privy to more information about the trends in your network, and your network is increasingly bigger as social networking expands, but technology is increasing the speed at which an information cascade can occur. Posting on a site such as Facebook or twitter can allow thousands of people to see your post instantly. This makes it much easier to create demonstrations such as occupy wall street. Information about where to meet and what to do can be conveyed instantly and publicly, instead of one phone call at a time. This has both positive and negative effects, and can contribute to devastating harm like the London Riots of this summer or economic disaster like the collapse of the housing market.
Furthermore, today businesses are using sites like twitter to combination of social networking and endorsements to prompt information cascades. Because information cascades are somewhat difficult to stop, companies like Comfort Inn are using celebrities to endorse their products on twitter, where thousands of followers will reed the tweet and be influenced by it in an attempt to create an information cascade, securing the product’s place in the industry.
This reminded me of the strong triadic closure property. In terms of strong ties and weak ties, when someone you are strongly connected to (a close friend) or someone you want to be like ( a celebrity) chooses to act in a certain way, you are probably more likely to act in a similar way. When those you are strongly connected to do something, it is more likely to create an information cascade, which is why companies are trying to use endorsements on twitter. This also means that information cascades are more likely to occur in networks that strongly connected, such as the stock market (where a drop in one stock can downwardly effect the whole market). When you are weakly connected, it is more likely that more people will have to give you high signals, in order for an information cascade to occur. This is why companies need to be careful with who they choose to endorse their products.
http://www.economist.com/blogs/democracyinamerica/2011/10/mass-movements
http://news.yahoo.com/twitter-changes-business-celebrity-endorsements-081715153.html