Information Cascades and Innovation
As we learned in class, if the difference between the number of acceptances before a node and the number of rejections before a node is more than 2, then regardless of that node’s private signal, he or she will ignore it and go with the earlier majority. Although the article linked below avoids our terminology, it nevertheless explains that such information cascades can result in herd behavior.
Herd behavior, or herd mentality (specifically referring to humans), may be harmless but as mentioned in class, information cascades can be erroneous. When dealing with innovation, if everyone follows the majority, then as a result there is a lack of new ideas and creativity is reduced.
“Groupthink is a psychological phenomenon that occurs within groups of people. It is the mode of thinking that happens when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives. Group members try to minimize conflict and reach a consensus decision – without critical evaluation of alternative ideas or viewpoints. The main negative cost of groupthink is the loss of individual creativity, uniqueness and independent thinking. This type of behavior is contrary to what is desired when trying to come up with breakthrough ideas for innovation.”
The article sheds some light on the underlying mechanics of innovation. For there to be innovation, there must be interaction between people who have different ways of thinking; such interaction leads to new ideas. However, herd behavior/mentality causes cohesiveness, leading to the opposite. Instead of interacting with each other and coming up with new ideas, people conform to the same ideas or methods.
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Understanding why people conform would be a good starting point in trying to boost innovation.