Do you consume information or does it consume you?
Why do you read this blog? What other media sources do you consume? If information were food, how healthy is your diet? If information sources were investments, what does your portfolio allocation look like and how is it “performing?”
As a reader of this blog, you are likely an investor, trader, money manager or curious observer of financial markets. If you do not recognize that your information diet has a significant impact on your financial success, you have either suffered in some financial way or you will suffer at some point in the not-too-distant future… whether you realize it or not.
… in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it. ~ Herbert Simon (1916 – 2001)
Herbert Simon, author of the preceding quote, is probably best known for his work with (and coining the phrase), bounded rationality, which is a concept that suggests that individuals are only partially rational and that their rationality is bound by the information they consume, the complexity and abundance of the information available to them and the finite amount of time they have to make decisions.
As Simon suggests in the preceding quote, “a wealth of information creates a poverty of attention.” Today’s tremendous abundance and velocity of information does not make consumers more equipped to make rational decisions — it has a constricting effect upon the bounds of rationality.
More information, however, does allow for greater knowledge and decision-making capacity (the operative word being capacity) — it just does not, by default, translate into better judgment. In other words, the consumer of information, to efficiently transform information into knowledge and knowledge into optimal decision-making capacity, the consumer must mindfully and efficiently allocate their attention among select sources of information or otherwise risk their attention being consumed (and rationality further bound) by the information.
In other words, with regard to information, one must either be a mindful consumer or be consumed.
Of course, one may also mindfully select sources of information purely for entertainment purposes. It is important, however, that the consumer understand the difference between entertainment and fact-based information. Making mindful information consumption more challenging, the former often pretends to be the latter.
What information sources do you consume? What does your “media portfolio allocation” look like? Do you seek sources of information that only align with your perspective (confirmation bias) or do you seek a variety of opinion?
Kent Thune is blog author of The Financial Philosopher
September 2nd, 2009 at 11:40 am
Me’s like facts, and since you’ve always provided them to bolster your theme I’ve read you for 3-4 years. Personally I’m at the point where I’ll most likely be consuming alot less because for me it has taken several years to understand the flow of information and it’s effect on the market and peoples physchology. What the author says is pretty true, I’ve been doing some research on memory over the last several years in reference to the recency effect, imho, there is a six month, three week and one day time frames that effects the present decision making of most folks, plus, all of that childhood stuff.
September 2nd, 2009 at 11:52 am
Torrie, can you point to some of your research? I’d be interested in seeing why the 6 month, three week, and one day stood out so. Or can you just offer it up here?
September 2nd, 2009 at 12:03 pm
I like to be a Jack-of-All-Trades type of information consumer. I have probably eight tabs open on firefox but I don’t dip into all of them too deeply. I’ll scan them for points of interest. They are mainly from the middle right to the middle left economically and politically and I try to read them based on the merit of the story/information with an objective juxtaposition created by other sources telling the same story from a different perspective.
A few years ago I ran into a few information overload walls where my brain just couldn’t take anything more in. I was really concerned because I thought I was losing it. I found I just needed to pull back and create some down time for myself because there was just too much data for my processor to handle. Since then I’ve learned to be more selective of what I consume and I have found I really don’t need to consume that much in order to get what is going on.
BTW, in order to be a more effective trader I’ve dumped sports, movies(for the most part except on occasion) and politics from my points of interest. Sports do nothing for me financially and are really a distraction from much more important things in people’s lives like earning a living and families. Movies don’t even teach or send a message much any more and with regards to politics, I’ve found much more inner peace by not worrying about what I can’t control anyway.
I guess that is what maturity brings. Being able to see easier that you are in a forest after having noticed a few trees.
September 2nd, 2009 at 12:06 pm
Broadly, http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=The+unexamined+Life
Kent,
nice post~
~~
this: “information diet”, to me, is Key.
We’d do well to reflect upon: “the most Important organ in our body?”
How we Feed it/ourselves fuels our Journey, determines the Path, and the Ports we call..
~~
lunch-hour R&D break..
September 2nd, 2009 at 12:11 pm
Hi Kent – nice post !
The silver bullet…’More information, however, does allow for greater knowledge and decision-making capacity (the operative word being capacity) — it just does not, by default, translate into better judgment”.
Bingo !
I make my living as a consultant applying semantic technology to knowledge intensive enterprises to unlock and analyze dynamic data to transform into actionable information for better decision-making and to make knowledge workers more productive and organizations more profitable.
But you’re right that there’s no ‘technology solution’ for the better judgment part
September 2nd, 2009 at 12:15 pm
Rob, I’ve been doing in deepth reserach into “Decision Making”, the goal has been what are the core principles that most everyone shares. The time frames I mentioned, imho, form ones present well being or attitude, which has a significant effect on ones decisions today, most especially when it comes to a persons discipline. A good example of this phenomena would be the Clintons in the White House, every time a scandal popped up they fought it toothe and nail, and never stopped, and over time some other thing more important would pop up and other stuff would fade as far as folks emotional connection. I would also add, reading information while good and valuable, what is more important is what are you “Hearing”, this week on the news now we have a big push for possible, Double Dip, Clunkers pulling sales forward, a big question mark on China, is the stock market really forward looking, what are things valued at, blah blah blah, alot of folks questioning things…………..what has happened in the market in the last 3 weeks, pretty much nothing………….thus, folks are questioning the rally, now the rally is six months long, so that has the biggest pull for emotions. Back in April we had “Green Shoots, Green Shoots”, heck, i’d never heard that term yet it spread like wild fire. The prior post was about a symphony, so it is more important too listen imho than consume information and opinions. Hoped that helped.
September 2nd, 2009 at 12:32 pm
You have to be a clever thief when it comes to just about everything in life.
I enjoy this blog because I learn everyday from money people and observe their reactions, I don’t understand everything but I think I get the big picture.
Big media entities do not go very far into educating their readers or viewers, snapshots of consequences with very little time for causes.
I don’t think too much information is a disturbance if it is diverse, anyone in their right mind should avoid TV, short attention span BS for the short sighted folk.
I also enjoy the sense of humor around here and I don’t feel so lonely in my thoughts when I read other posters.
September 2nd, 2009 at 12:41 pm
What a pleasant surprise to find this at the Big Picture. Very different from one of Barry’s tirades, not that I don’t enjoy Barry’s tirades.
In my case the answer is it depends. Sometimes I am very controlled in what I consume and at other times it controls me.
Right now it is more in control of me, I guess because I am looking in some different directions and I don’t quite know what I will find. Eventually I will bring it under control and settle into some new habits until the next challenge comes along.
Nice blog. I added it to my Favourites
September 2nd, 2009 at 12:50 pm
What is information?
What is information for any brain, which can be different from math understanding.
Brain(simplified version):
Information = Data in context
Context = Organized data
Learning is the self organization of Data, which builds context, which allows any brain to evaluate Data.
In other words every thing we understand is based on what we have learned and to a large degree on when we have learned it based on previous data. Or be careful what you call fact, it might be only a fact to you.
Then there is the small problem that true as well as consciousness is a scale not a state or the asymptote on the scale. Therefor any economic “fact” based on selection of data going into an statistical model is not a fact, but rather very subjective. Or in other words, if you have a lot of money being controlled by just a few individuals the marked will be pretty much irrational to everybody else. Highly complex system stabilize best if all nodes have the same effect on all other nodes, if you have an unbalanced system you get what we got. No matter how rational you think you are.
September 2nd, 2009 at 1:07 pm
To: How the Common Man Sees it @12:03:
You’ve dumped sports and movies for trading?!
Football season is coming up….C’mon! Hell, you can’t trade on Sat and Sun. And it’s not as if “Trading” isn’t the same thing as gambling, because it sure as hell it.
Go strong on Sat afternoon college football and parlay your winnings into more action that night. Then, deal with the inevitable setback on NFL games on Sunday, and DoubleDown Monday night!
The underlying post does fit right it, though, with the HUGE lie that trading is investing/speculation for smarter people who make money by analyzing information and making good decisions. Now, I know everyone reading The Big Picture is one of those savvy Trader Dudes they show in those nauseating commercials on CNBC…you know…the guy at home Living the Trading Dream in front of his monitors…and he has his headset on, checking out the latest TradeStation Technical analysis, making Killer Financial Moves…just before he heads out to throw the ‘ole ball around in the backyard with his youngest son…and that this guy is not a gambler…he’s a Trader!
But for the rest of the people out there…Speculating their Way to Prosperity….
A healthy morsel of information that digests rather efficiently into knowledge, just might be the following:
Trading=Gambling. It doesn’t make it wrong. But when you put money down that SPY is going up, you are making a bet. And should you lose that bet, it’s no different than if you lost on the Steelers getting 2 points at home vs the Patriots. If you make a series of these unfortunate bets on the SPY, then you’ve enter the land of Degeneracy…just like the Desperado taking Miami and the points because “the Dolphins are great at Home on Monday Nights!”. At least the Football Gambler is being honest with himself, though…while most Traders(not all..and certainly not anyone at TBP!) live the Lie, by telling themselves they are “Investing” and that these decisions are “Information-Based”.
It was a good post….But still, I can’t help but to think that you believe that with the “right” information (whatever that is), many people are able to Trade their way to prosperity.
Instead, you might consider that if many traders simply quit pretending that Trading does not equal Gambling, that they might acquire a new and liberating wisdom that would whisper: “If you’d be ashamed that you lost thousands of dollars betting on football games, then you should be similarly ashamed that you lost thousands on the Quad Qs.”
[And I'm not saying they should, because it's their money.]
Maybe by embracing the fact that Trading is nothing more than gambling, the Would-Be-Trader would approach their plays with more humility. And then…they might actually make better decisions, take on less risk…and not spend their lives searching for that elusive elixir of Alchemic Information in the form of MACDs, Head and Shoulder Tops and Oversold Divergences…
If Markets aren’t Efficient, then they’re Entropic…and even if you are fortunate enough to find that Magic Information…by the time it hits your eyes its efficacy will have already run its course…because even the bits of info that actually works is fleeting…and this, of course, Feeds the Need… to Feed…on ever more Information.
[This has been a Public Service Announcement from the Nevada Gaming Commission, encouraging people to just get out there and have some fun. Come Gamble with us!]
September 2nd, 2009 at 1:17 pm
Marshall McLuhan:
“All media exist to invest our lives with artificial perceptions and arbitrary values.”
“Anyone who tries to make a distinction between education and entertainment doesn’t know the first thing about either.”
“Politics will eventually be replaced by imagery. The politician will be only too happy to abdicate in favor of his image, because the image will be much more powerful than he could ever be. ”
“The new electronic independence re-creates the world in the image of a global village.”
Happy Labor Day to all……..As always, your mileage may vary!
September 2nd, 2009 at 1:31 pm
Dan Duncan – you hit the nail on the head
September 2nd, 2009 at 1:36 pm
Actually, gambling on sports may offer a more level playing field. I’m not kidding.
September 2nd, 2009 at 1:45 pm
Manny, I agree – So far it wouldn’t appear that sports are all rigged (yet!)
September 2nd, 2009 at 2:05 pm
It matters not whether you have information (disinformation, too) or knowledge or capacity if you don’t know also know the use to whic that information or knowledge will be put.
What is also paramount is the INSIDE information (dis..) possessed by as few people as possible for a time PRIOR to an event occurring that would empower that information, i.e., that nugget that George Soros used to short the pound, for instance, the timing and by how much it would be de-valued to bet 10 billions bucks to make a billion in a few days. Tell me he didn’t know that and I will believe that pigs can fly.
Information and knowldege without timing is less than useless. It does me no good at all to know in my bones based on ALL available data, from every expert in the world, processed in superfast Crays, that the Dow is Never going to hit 15,000 in the 365 days. It’s nice to know that, but hardly changes my life one way or another, and therefore has little value.
It’s how information and knowledge are manipulated and utilized by those in power to disseminate it (or not), first to their Insiders, and contributors and then much later to the rest of us via mass media. e.g. The $400,000,000,000 highway bill on its way to passage thru congress specifying, say, the discontinuation of long lasting additives to extend the life of the highway, is going to do the additive company executives (but not necessarily the shareholders in Toledo) or potential buyers or sellers, a hell of lot more good than it will do me after the bill is passed.
Once everything is known by everybody, profit becomes impossible, because
“The essence of profit, is the other’s ignorance”.
September 2nd, 2009 at 2:25 pm
@Dan Duncan Says: September 2nd, 2009 at 1:07 pm
Hey Dan,
First off, I am a working guy. That only gives me a few hours per day to study the markets during the week so five or six hours per day on the weekend is when I do my serious market research. That pushes the sports out the back door fortunately/unfortunately depending on how you look at it. You can’t look in depth at betting on sports and in depth at investing in stocks and expect to be successful unless of course that is all you give your life to and that is not how I want to live my life. Also, I have reason to believe that sports are influenced by organized crime in order to skew the betting and skim the most profits possible from us suckers. Computers aren’t just great for making odds and correlating statistics, they also work great for tracking bets.
Secondly, trading/investing is not gambling. You are buying shares in a company. Something that is for the most part producing a good or service for the economy for which it is remunerated. That is the type of investing/trading I do. It is far different from what some people out there in the markets do which probably would be considered gambling.
Suffice it to say that any thing I buy in the markets I would be more than comfortable holding for the longer term if I necessarily had to and when I do trade a position it is to build a position over the long term. So no, I am not gambling, I am investing in companies that have an underlying values to them and I am building my positions based on probability trading. The reason I pick these is because the trade in them is inherently safer since I can’t afford to lose what little money I can manage to preserve from the dog eat dog world of common man survival.
If you want an example of what I trade then look at my call on this board for INTC last fall. At the time it was a washout day in the markets and INTC had traded down to around $13. People were panicking and calling the end of the world. This put INTCs dividend up in the 4% range. This was an undoubted buy for me because I knew INTC was not going away any time soon and the stock proceeded to rise by 50% over the next six months. I just recently called a sell on that. Not because I don’t think it will go higher but because the probability of earning another 50% run on INTC after it just had a 50% run in six months goes way down. That is the type of trading I do. You can call it gambling if you want but I’ll have to disagree with you. It is just plain common sense.
September 2nd, 2009 at 2:59 pm
Common -
“I have reason to believe that sports are influenced by organized crime ”
And the stock market is different how?
“Secondly, trading/investing is not gambling. You are buying shares in a company”
I fail to see how day trading or swing trading qualifies as investing in a company. It’s still gambling. Traders have no vested interest in how the company does in the long term, in many cases they don’t even have an interest in the company at all. Their only interest is what the companies stock is going to do in X amount of time so they can make Y amount of money. They are shareholders in these companies in name only.
I don’t think Dan was making a judgment call when he equated stock trading as gambling. I’m certainly not.
September 2nd, 2009 at 3:13 pm
And the stock market is different how?
It is a lot harder to influence an corporation over the long term than it is the star quarterback, home run hitter or coach over a game or a season
The parameters are vastly different. Maybe on the short term you can do some damage but I don’t trade to benefit on the short term. The only way I usually benefit on the short term is by being in the stock when good news happens or having cash to get into the stock when a downdraft hits
I fail to see how day trading or swing trading qualifies as investing in a company. It’s still gambling. Traders have no vested interest in how the company does in the long term, in many cases they don’t even have an interest in the company at all. Their only interest is what the companies stock is going to do in X amount of time so they can make Y amount of money. They are shareholders in these companies in name only.
Yes, those are the ‘gamblers’ I referred to. I am more of a value investor that uses the swings to build my base of shares. I always try to start with a stake and build it up unless traders drive it to insane levels or I am using the shares as a safe haven during times of market turmoil
September 2nd, 2009 at 3:17 pm
Comsuming or being consumed is the difference between reacting to information and playing off of it.
People treat information like it has the shelf life of tater-tots. That may be because, in this game, people’s immediate take on the information matters more than the information itself.
I prefer to treat it like wine. I consume information so as to log it and look for trends…to form my behavior in advance of the next information.
I look for thinkers, those capable of dispassionate analysis because they are not bound to their ideologies, be they political, intellectual, philisophical, moral, etc. I’ll go on a travel website and only read the negative reviews. Because people that think you’re shyte don’t typically come up to tell you so, I want to determine their motivation and its validity.
I don’t watch rugby for fairies, or, as y’all call it, gridiron football. Not only have the networks made the game unwatchable, all I see is a bunch of latent homosexuals…not my thing. Moreover, I see it as the symbol of Fat Bastard America… I’ll concede that the first two rounds of the NFL playoffs is a blast.
September 2nd, 2009 at 3:34 pm
Common – point taken
September 2nd, 2009 at 5:56 pm
I only come here for the chicks…
September 2nd, 2009 at 11:30 pm
Common Man,
You’re wrong, IMO. Trading is gambling, pure and simple. You can’t possibly do enough research or have enough information to make an informed decision about the “value” of a stock price. When you buy it, you are simply betting that it will “win”.
September 3rd, 2009 at 11:22 am
My source of information? Maria Baritiromo.
I want to know what the street is “thinking.”
September 3rd, 2009 at 11:34 am
@aupanner
Gambling is playing a game that is guaranteed to lose if you continue to play it the way it is set up. The whole point of gambling is that when you play your pride is saying that, despite the odds, you think you will come out a winner. If you spin a roulette ball enough times and bet on it you will eventually lose all your money because of the house advantage. That is not the same with the stock market and companies. Most stocks, and especially established stocks, go up over the long run and the indexes do as well so there is not a guarantee that you will lose your money, unlike gambling.
September 3rd, 2009 at 12:43 pm
aupanner,
My reply to you got eaten. It must have been all the gambling references. Suffice it to say, we disagree
September 3rd, 2009 at 1:07 pm
LOL, this reminds me of that old bit about Soviet Russia.
“In Soviet Russia, information consumes you!”
September 4th, 2009 at 1:13 am
I have been reading online news groups since 1990, which I think makes me a pretty good bs filter, I have only every read a small number of stories in a newspaper as the lies grate me so much. I watch a small amount TV news on a government channel to get an idea of who is sucking up to who and where the government is dumping cash, so I know what industry to work in. I read lots of company reports, etc and go outside a lot and look at the world. The biggest problem I have is moving on a stock sometimes years before other people do. Even though I get near the bottom, it is often a long wait.
Trading is a gamble and some people turn it into a big one, but I don’t equate it to gambling, to do so is a lie. If you gamble you are only going to win back the regulated 70%-75% of your money each bet and in the long term, almost guaranteed, so you will lose it all. The odds are always set, you are going to lose, they are going to take the x%.
If you pick the right companies, for the right reason… you like them and you see them doing well. If you pick them when they are good value, if you have self control and patience, you will make a profit, you are going to win. All people make mistakes when trading, and believe the wrong things from time to time, the economy is also constantly changing truths to fallacies on a macro scale… that is not the same as pure gambling. Even if someone put all $ into one dodgy spec stock or something like that I would not call that gambling, just stupid, corrupt or lucky depending on the circumstances. If someone sold out at the bottom of a crash, again, just stupid.
It approaches gambling and the consequences can be just as bad, but for most people they just hold and lose the interest they would have had for x number of years had they not bought a crap stock or right it off against something else.
September 4th, 2009 at 10:18 am
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