Apple Should be Thankful for Information Cascades
This past August, Apple Inc. became the first American company to surpass $1 trillion in value. As the stock passed $207.04 a share, Apple’s value has risen despite initial fear that sales would stagnate after the release of the iPhone 8 and iPhone X. However, with sales better than expected, especially in China and Japan, Apple’s share rose to as high as $232 in October. Some optimistic investors believe it could be worth over $275, which would value the company at around $1.3 trillion. In short, Apple’s success is unprecedented, and it has people scrambling to find out the key to the tech giant’s success. It is indisputable that Apple’s innovation and talented team is the most significant factor in how the brand was able to spark their success. However, information cascades have contributed in a major way to how Apple has been able to establish a conception in the minds of consumers, whether or not they have proof.
In the Networks textbook, Cascade behavior in Networks is introduced using an explanation of “The Diffusion of Innovations.” When reading this, Apple products, and more specifically the iPhone, came to mind as the most applicable example. The diffusion of innovations addresses how new technologies, spread from person to person through social networks, with people influencing their own friends and acquaintances to adopt a new product or technology. A classic study used as an example of this is, “Ryan and Gross’s study of the adoption of hybrid seed corn among farmers in Iowa.” In this study, Ryan and Gross gathered from farmer interviews that though nearly every farmer learned about the study from salesmen, the majority were convinced to try using it by their exposure to the experiences of other people in their community. The most significant aspect of adopting a new technology is the fact that it is risky to adopt, and there is uncertainty in what you are trying. However, in the case of the farmers in Iowa, those who may have been initially wary of the product got confirmation from seeing their friends using the technology. This example can be directly applied to the major factors in the spread of Apple product popularity, as many people have purchased iPhones not necessarily for superior quality, but to instead become part of the majority that owns them. Simply buying one because everyone around you has one, rather than doing research to figure out if it fits you personally, is a direct result of the cascade effect.
https://www.cs.cornell.edu/home/kleinber/networks-book/networks-book-ch19.pdf
https://money.cnn.com/2018/08/02/investing/apple-one-trillion-market-value/index.html