Thursday, October 8, 2009

I think it works therefore it works…

A rather neat aspect of introducing a new operating system to the world – such as Microsoft is about to do with Windows 7 – is that there is an opportunity to watch two phenomena often associated with investment at work. One is the idea of information cascades. The other is the endowment effect.

Information cascades arise when people exhibit a tendency to do as “others before them” have done on the grounds that there is safety in numbers. The effect is self reinforcing - typically regardless of the veracity of the “first mover”.

So when “everyone” is trashing Vista it seems churlish not to join in.  The merits of Vista may have little to do with the size of the effect.

Moreover, the endowment effect, whereby people remain irrationally attached to “what they have” – their investment in an opinion - also helps ensure that changing the mind of the crowd about Vista is a tough call – and may never happen. Certainly the release of SP1 and SP2 appear, judging by the “whinge barometer” of letters to magazines and reviews, has not dispersed the crowd.

Now before Windows 7 has even been officially released (22nd October for that), there is a tonne of hoopla about its superiority with highly respectable geek critics such as Tech Republic running myriad articles such as “10 Reasons to like Windows 7” and many like variants.

Does it matter? Well yes actually. Endowment theory means the generally positive view of Windows 7 has a good chance of staying even if the OS is no better than Vista. Moreover those with an “investment” in saying it is great face incentives to work hard to rapidly iron out bugs, figure work arounds and generally encourage Microsoft to make it great.

From the other side of the ring, Vista hating will likely appear to have been well justified. Already (Tech Republic and Znet again) stories about “forgetting the whole sorry saga” are appearing – which might mean Microsoft stops supporting Vista sooner than some would like.

In contrast XP – which was a “winner” according to its information cascade, is coming in for more positive reinforcement as geekdom sets out ways to make Windows 7 emulate and work with XP.

So – here – right in the middle of what we might assume is the world’s most rational of market places for evaluation are prime examples of two classic psychological effects operating in ways Mr Spock would have loved to hate.

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