Cascades, Mugabe, and Bitcoin
Decision-making is a major point of interest when analyzing networks. When an individual is presented with a binary decision, the individual generally refer to others’ decisions when coming to their own decision. For example, if someone is deciding which restaurant to go to, they may go to a restaurant that appears to be busy, expecting the restaurant to be better than those less busy. This phenomenon is known as an information cascade. Information cascades, as described in the course, can be observed as driving forces for some of the most prominent current events in the world.
For example, Zimbabwe just experienced the resignation of their long time dictator-President Robert Mugabe. In repressive regimes such as Zimbabwe’s, information is generally very scarce. Thus, out of fear, the population generally over-estimates the power that a regime holds. This prevents any uprisings from starting because the average individual will assume that no one else will rise up with them, meaning that a successful revolt is unlikely. The Zimbabwean military reversed this thought by being proactive, igniting a chain of positive thought amongst the Zimbabwean population. This was crucial in the Mugabe losing power because he had to lose the Zimbabwean elite’s support to be ousted without civilian apprehension.
Another example is the recent surge in cryptocurrency popularity, discussion, and price. “Blockchain” has become the biggest buzzword in tech, but few actually understand its meaning or usefulness. In fact, there has been very little analysis in how Blockchain will improve the use of cryptocurrency. This shows that its recent surge in popularity is somewhat unjustified. Economists have called its recent rise to fame “irrational” and a “self-feeding frenzy,” or in other words, a classic information cascade. Suddenly, everyone else is investing Bitcoin, so an individual thinks it’s a good idea for the individual to also invest. And, every other company is developing blockchain efforts, so another company thinks they should to.
These are just two examples of how information cascades play a significant role in our everyday lives, influencing major events and trends.
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