Theranos and Incorrect Cascades
It takes very little information to start a cascade. Sometimes, the cascade even goes in the opposite direction to the actual state of the world.
The rise of Theranos, a health technology company which no longer exists, can be viewed as an incorrect cascade. It is possible, even likely, that Elizabeth Holmes, the founder of Theranos, manipulated the “signals” that investors and the public received about the company to trigger an information cascade, allowing her to rise to prominence.
She raised money from prominent investors, which probably stood out as a major “high” signal to other investors. She also copied many behaviors from Steve Jobs, such as wearing black turtlenecks. Since Steve Jobs is generally associated with successful business, such imitation likely strengthened the “high” signals the public received. Finally, she kept the operations of her company very secret. This served to hide the lack of any actually viable product, masking any potential “low” signals.
These manipulations likely contributed to the initial meteoric rise of Theranos. Since only very little information is needed for a full-on cascade, Elizabeth Holmes only needed a few strong initial “high” signals for her company to explode in popularity, which it did. Sometimes, the crowd isn’t so wise, especially when it’s being led by a false shepherd — a fact that Theranos’s rise proved.