Disrupting the signal

James Surowiecki - Wisdom of Crowds - pp.61

Distinguishing between the two kinds of imitation [intelligent imitation vs. slavish imitation] is, of course, not easy, since few people will admit that they're mindlessly conforming or herding. But it does seem clear that intelligent imitation depends on a couple of things: first, an initially wide array of options and information; and second, the willingness of at least some people to put their own judgment ahead of the group's, even when it's not sensible to do so.

Do such people exist? Actually they're a lot more common than you'd expect. One reason is that people are, in general, overconfident. They overestimate their ability, their level of knowledge, and their decision-making prowess. And people are more overconfident when facing difficult problems than when facing easy ones. This is not good for the overconfident decision makers themselves, since it means that they're more likely to choose badly. But it is good for society as a whole, because overconfident people are less likely to get sucked into a negative information cascade, and, in the right circumstances, are even able to break cascades. Remember that a cascade is kept going by people valuing public information more highly than their private information. Overconfident people don't do that. They tend to ignore public information and go on their gut. When they do so, they disrupt the signal that everyone else is getting. They make the public information seem less certain. And that encourages others to rely on themselves rather than just follow everyone else.