Information Cascades and Law Firm Strategy
1 Comments - Posted By Rob Millard In Strategy 101 , The Strategy Process , , , , , , - Permalink -
Much law firm strategy, especially in smaller to medium sized firms where the partners all know each other, is crafted in strategy meetings or at strategy retreats. Typically, such meetings consist of some preparatory information being presented and then, quite quickly, the meeting moves on to consideration of a number of alternatives. It is here where the phenomenon of an “information cascade” can rear its ugly head.
In 2005, behavioral economist Robert Shiller and Karl Case conducted a survey among San Francisco home buyers, measuring their perception regarding likely house price movement in their market. The median expected price increase, over the next decade, was nine percent per year!
Obviously, history has proved them to have been badly wrong. According to Shiller & Case, their baseless optimism was based on two factors: salient price increases in the recent past and the apparent, and contagious, optimism of other people. In effect, an information cascade.
