Information Cascades
Market panics, viral misinformation, and coordinated crisis responses are all information cascades.
Information cascades convert local detection into population-wide coordination within seconds, enabling collective defense against threats too fast for centralized coordination.
An information cascade occurs when individuals observing others' behaviors update their own beliefs and behaviors, creating a chain reaction. Each individual has a response threshold - the amount of evidence required to trigger their response. When enough neighbors respond, your threshold is crossed, you respond, and your response pushes neighbors over their thresholds, creating positive feedback.
Cascade speed is determined by signal transmission time, response latency, and network topology. In dense herds, cascades propagate in 1-3 seconds across hundreds of individuals - faster than predators can exploit. Cascades terminate when all individuals have responded, counter-information arrives, or spatial boundaries limit propagation.
Once cascades start, individuals stop assessing evidence independently - they rely on social information (herding). This is adaptive when individuals have low private information but maladaptive when cascades are triggered by false alarms.
Business Application of Information Cascades
Market panics, viral misinformation, and coordinated crisis responses are all information cascades. Organizations must design systems where defensive cascades (coordinated responses) propagate faster than threats, while preventing destructive cascades (panic, rumors) through transparent communication.