Interesting study by way of Discover magazine: The Human capacity to juggle discrete data points tops out at 4.

This is significant for traders, who must digest info on the fly, as well as investors:

"Surgeons, air traffic controllers, waitresses, and bus drivers—or anyone in a high-stress job—take in a steady flow of information that needs to be processed on the spot. But how much is too much? Cognitive scientists in Australia have concluded that humans can juggle four “chunks” of information at any given instant. After that, they become confused. Their next move is no more reasoned than flipping a coin.

Graeme Halford of the University of Queensland and his team presented bar graphs with information about cakes, cars, or clothing to students and academics and asked them questions. In one case, a graph showed that people generally prefer chocolate cake to carrot cake but that the degree of their preference changed when variables like icing or frozen or fat-free cake were introduced. When juggling four pieces of information, the subjects were consistently able to answer the questions correctly. With five variables or more, they could not.

What makes the experiment innovative, Halford says, is the graphs were presented in such a way that subjects could not consolidate data—what psychologists call chunking. Understanding these limits of human cognition can improve efficiency—and save lives. Halford hopes his findings will help in the design of high-stress work environments. “I think in the modern world, most jobs have a lot of complexity,” he says, “and no one knows how to deal with that complexity.”               

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Now you know: 4.

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Sources:
Brains Study Brains: Juggling Info
Susan Kruglinski
DISCOVER Vol. 26 No. 07 | July 2005 | Mind & Brain
http://www.discover.com/issues/jul-05/rd/brains-study-brains/

How Many Variables Can Humans Process? (PDF)
Graeme S. Halford et al.
Psychological Science, Vol. 16, No. 1, pages 70–76
January 2005
http://www2.psych.cornell.edu:16080/cutting/courses/halford.pdf

See also:
Analysis of Complexity in Cognitive Tasks (PPT)
Keynote Address to the 35th Annual Conference of the Australian Psychological Society, Canberra, October 3-7, 2000
http://www2.psy.uq.edu.au/~coglab/papers/apskeynote/

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Category: Investing

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3 Responses to “Juggling Info”

  1. David Bennett says:

    Back in the seventies one of the frequently raised concepts of “systems analysis” was the “magic numbers of 7 and 100.”

    7 (based on experiments of that time) was the number of “pieces” that could be held at one moment in the brain, 100 the maximum number immediately recalled. “Systems” were ideally deasigned to take in account these features.

    Of course the social mind shuts this kind of stuff out. Everyone should know by now that as a system iincreaees numerically. potential complexity increases expotentially and this is the issue of “scaling” a word that is thrown around meaninglessly. For example the numbe of possible connections in an N member system is N (N-1), a basic equation that should be known to all.

    Similarly many are surprised by the 30 year iold observation of Brook’s in “the mythical man month” that throwing programmers at a job does not necessarily speed production (in part because the complexity of organization increaes problems of connection, see above) Or notions that the shape of a project tends to take on the *real* channels of communication and concentrations of power of the social connection that creates it so that in an a theoretically ideal world we would reshape the organization to fit the features of the product to be designed.

    This kind of stuff doesn’t even register, it is almost taboo. It is subversive because it provides pragmatc approaches to question existing organization. Process and how to best organize it is not something we are encouraged to think about.

  2. Damian says:

    Isn’t there a world of difference between juggling 4 sources of info and 4 inter-related (or variables) sources of info? I’ve seen traders work on 6 screens, for instance, and had no trouble juggling it. Or keep, say 40 or 50 positions in their head (Hell, I can’t do it, but they had that talent).

    So it not surprising to me that people have trouble juggling variables when the numbers get big….

  3. J Lonsdale says:

    It seems like the important implication of this experiment is not the number 4, but the necessity of making sure data is displayed in ways that allow chunking. 4 is the consequence of doing it wrong.