Kent Thune recently asked me a few questions about The price of paying attention. He used a portions of my answers in his column, but much of what I wrote was off topic.

Never wanting to waste anything once written, here are those thoughts on Research, Media, Information Sources et. al. :

 

1. How much time do you spend each day searching for and consuming information?

Less and less – I probably spend more time looking at curated material and less outright searching than I used to.

Twitter has become the new tape. I am constantly discovering new voices there. I do find myself looking for new sources, but that is not the focus of my process.

Rather, I seem to be hunting for excuses to eliminate bad, unreliable or biased sources. Investors have this cognitive bias that “more information” helps they make better informed decisions. It turns out not to be true; more information helps them be more emotionally comfortable with their decision making – over confident in fact. Paradoxically, more info leads to overconfidence and WORSE decision making.

 

2. How do you choose your information sources? Is this process similar to building a portfolio of investments?

Process is important. I want to know that there is a method to the madness of the person I am reading. Sure, track record matters, but I need to see a justifiable rational process that is not based on luck or randomness.
These days, I seem to be reading people rather than organizations. For example, Dan Gross is at Daily Beast – I will read him anywhere, even at a site (like the Daily Beast) filled with biased and corrupt writers I detest. I’ve read Jesse Eisinger at TSCM, WSJ, Portfolio and now Pro Publica – where ever he goes, I am a reader. And James Montier used to be at Dresdner Kleinwort, now he’s at GMO. So it’s the person, not the organization that matters most to me.

I try to eliminate people with bias or a terrible track record or who have to crank out content – give me any excuse to remove one more source of bad or mis-information and I am happy to do so. The perma-bulls and perma-bears are easy targets; the harder ones are the bad judgment or poor process.

For example, Kevin Hasset is one of the authors of Dow 36,000. That’s a fatal money losing horror show of awful judgment AND terrible timing. He is henceforth quarantined as a source for anything ever again. I cannot afford to let anything he writes influence. Ben Stein is another guy who simply murdered his readers financially. There are tons of other examples – people who denied the 2007-09 recession as late as October 2008, rewriters of history. They are too expensive, too costly, to allow them to influence my thoughts.

Every now and again, I have to sequester a writer I like. Perfect example: Look at Andrew Sullivan, who is a compelling and interesting author. I used to read him all the time. Even worse, he is a powerful and persuasive writer, making him all the more believable, and therefor dangerous. But his judgment was so god-awful about the Iraq war, that I simply quarantined him as a deadly infection, never to be trusted again. Guys like him are a curse to anyone who run money.

 

3. Have you noticed a proliferation of amateurism and incompetence in financial media in recent years? If so, which media type (i.e. web, print, cable, etc) has deteriorated the most?

Television News is just awful, cable especially. We switched off the TVs in the office about 5 years ago and never looked back. CNN is mostly idiotic, Fox News actually makes you uninformed + filled with wrong info, and CNBC has turned into this money-losing shout fest.

“Lose the News” was a column I wrote in 2005, and its more apt than ever (here)

The WSJ, once the greatest paper in the world, has lost a good chunk of credibility in my eyes since Murdoch took it over. The reason is his blatant bias – anything with a remotely political relevance is now 100% untrustworthy. Its still an excellent news source for me, but so long as he owns it, there is an asterisk attached to every article. MAY BE EDITED FOR POLITICAL REASONS. Forget the phone hacking scandal, that old bastard should go to jail for what he did to the paper. I hope NWS Corp spins it out so it can go back to being the best paper in America.

 

4. What is “chart porn” and why do you believe it is an apt term?

The website Chartporn.com credits me with coining the term some years ago, but I have no idea what I was thinking – other than gratuitous, hot sweaty charts of steamy market action and beautiful economic data are so wonderfully informative.

If a picture if worth a 1000 words, a well-crafted chart is worth 10 times that.

 

5. What cautions and advice can you offer traders with regard to their information consumption? Is there a diminishing return of information (i.e. more is less)?

Why are you consuming content? Are you looking to confirm a previously held belief? (Confirmation bias). Are you looking for additional information to make you feel good about your decisions? (Overconfidence bias)
Have a methodology that is not dependent upon finding some tiny piece of hidden info. That is not a repeatable process.

 

6. At The Big Picture, you don’t use SEO strategies or button-pressing headlines, such as “3 Reasons to Buy Gold Now.” Has this honest and often irreverent approach to financial news attributed to your success as a blogger?

Daniel Boorstin, the former librarian of Congress, once said “I write to discover what I think.” There is a lot of wisdom in that.

My writing is a way I manage to take all of the related but disparate thoughts across a variety of disciplines and organize them.

Here is a little secret: I write for me, not the reader. If that sounds odd, or anti-social, or even selfish, well, its all 3 of those things. But that’s why its very honest and perhaps why some people find it helpful. I am always seeking the Truth, trying to discern what is reality. There is enough bullshit in the world, who needs another SEO driven, hyped up headline content farm?

 

7. How important is intuition for the trader and how might information consumption affect it?

I don’t know, but I suspect intuition is wildly over-rated. Is it consistent reliable repeatable? If intuition was all that important than newbie traders with good intuition would be able to sit down at a desk and making a killing.

That does not seem to ever happen.

I suspect the best traders learn to internalize lots of what they have learned over time, and what appears to be intuition is really the result of 1000s of hours of hard work, research, practice, experience.

 

Thanks again, Barry.

Category: Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Q&A: The Price of Paying Attention”

  1. Greg0658 says:

    one more please with brown sugar on top: 8: do you use a speech to type software? which? if not – how many words do you type/minute?

    my answers:
    I type all these posts by fingers / I have an early Dragon Speak – never perfected it to my voice >Win98se / wpm – haven’t taken a test in years

    ~~~

    BR: When I was working on Bailout Nation, I tried using VR — and I discovered first hand that speaking and writing use totally different parts of the brain.

    You end up with something very different spoken vs written.

  2. rocketgas says:

    I know psyc is soup of the day, but all it really tells you is what you already know, follow the numbers. How did I choose you as an information source, cause you do the math. Why do I read Mish, cause he does the math.

  3. Gibbon says:

    There is a bird in Africa that follows the elephants and picks out undigested seeds from their enormous droppings. At times I feel like that bird. In order to find one bit of meaningful financial data, I have to wade through mountains of crap.

  4. simoncz says:

    Whatever Murdoch has done to the WSJ he’s done 10 times over to the Times in UK.

  5. gkm says:

    I think #6 is the most poignant thing I have ever seen written at TBP.

    I’m not sure it’s a great strategy to “quarantine” someone. I think it’s best to listen to what they say in isolation from your position in the market. When someone steps out and makes a bold prediction, it’s time to sit up and take notice.

    For example, my bro-in-law predicted RIM would be bankrupt within 5 years just two weeks ago. RIM is up 15% since then. Always listen to who is saying what and when.

    Finally, all the great traders in history have used their “intuition” to test themselves and the market. They would sell short when they thought the market might be going higher to see how it reacts and how they feel. IMHO this is wisdom.

  6. Cui Bono says:

    Great column/essay/whatever! I wonder how long it took to write. I suspect stuff this good does not just pop out of ones pen, that it takes time and thoughtful effort. I second the last sentiment: Thanks again, Barry.

  7. [...] That said, there is a cost to paying attention to it. Here is Barry Ritolz with more on how to eliminate bad influences with poor track records. [...]

  8. Expat says:

    It is certainly true that intuition and so-called natural talent are not what they appear to be. Ask Larry Bird, Tiger Woods, or Pete Sampras whether their success is born of talent or hard work. Great traders seem to be intuitive because they have the ability to store and process information and experience.

    When an opportunity arises in the market, they recognize patterns from previous experience. They don’t need to research basics since they have it their mental disposal. They understand risk and can can apply the appropriate strategy because they have done all this hundreds and thousands of times before.

    I don’t disagree with the notion that some guys “get it” and some don’t, but intuition and natural talent are the product of discipline, learning, curiosity and the desire to be better and richer with every trade.

  9. Barry writes:

    Here is a little secret: I write for me, not the reader. If that sounds odd, or anti-social, or even selfish, well, its all 3 of those things. But that’s why its very honest and perhaps why some people find it helpful

    It is more accurate to say: “I write first for me, not the reader.”

    Otherwise, there is little point in publishing what you write.

  10. Frilton Miedman says:

    Rather, I seem to be hunting for excuses to eliminate bad, unreliable or biased sources. Investors have this cognitive bias that “more information” helps they make better informed decisions

    I spend more time in skeptic mode than acknowledging articles at face value, always wary of my own confirmation bias.

    This is especially true on venues like CNBC, that target the dumb money audience.

    That said, Mark Hulbert has a proven technique that makes it worthwhile to take everything at face value, tally the results (bear or bull) and then bet contrary to consensus.

    His theory is that there are three types of analysis, right, wrong and deceptive, leaving a 2 out of 3 chance the consensus is wrong.

  11. bonzo says:

    I’m not sure about quarantining Ben Stein. He captures the zeitgeist of certain segment of the population (a none too sharp segment) and that is worthwhile trading information. I wouldn’t call Ben Stein a perfect contrary indicator, so that you always win by doing the opposite, but he isn’t pure noise either, at least not to me.

  12. tooktheredpill says:

    as usual a great article – this is one site I haven’t had to sequester.
    Bang on re Rupert – he didn’t even try to hide his bias in his Aussie papers.
    I know its a bit puerile, but I couldn’t help but have a laugh when he copped the shaving cream pie at the inquest in the UK.

  13. Sunny129 says:

    “Here is a little secret: I write for me, not the reader.
    If that sounds odd, or anti-social, or even selfish, well, its all 3 of those things.
    But that’s why its very honest and perhaps why some people find it helpful”
    —–
    In essence this is ‘somewhat close to’ what V.S. Naipaul ( Nobel laureate – 2001 for Literature)
    said” I write to my self and to others, is secondary’

    The Enigma of V.S. Naipaul’s Search for Himself in Writing
    http://www.nytimes.com/books/98/06/07/specials/naipaul-enigma.html

  14. louiswi says:

    Words to live by:

    “TV free by 2- 0- 1 -3″!!

    Just turn it off-you’ll be so glad you did.

  15. ToNYC says:

    I suspect the best traders learn to internalize lots of what they have learned over time, and what appears to be intuition is really the result of 1000s of hours of hard work, research, practice, experience.”

    Intuition is the result of abstract emotional calculus and the “hard” work is showing up with one’s sense doors open rather than assembling overlapping check-lists of facts and maximizing the digitizing. You can get there but you don’t really Know the hard-way, and the emotional trigger is not naturally queued up. As Krishnamurti infers the stress of deciding by concentrating interferes with the picture appearing. Intuition often arrives while getting totally mundane, like washing dishes or one’s body, or pulling weeds. The emo brain is doing lots of calculus every living moment and the moonlight of sleep provides a easy consolidation and the abstraction that often emerges.
    While a Liberal Arts degree may not guarantee a consumer goods-rich life, there are no degrees, schools, or arts as if a Conservative Arts degree existed; an oxymoron which presents, if anything, the pre-Galilleo default of tribal politics.

  16. faulkner says:

    Barry, Your answers indicate you have already completed the most essential step: Establishing criteria for what gets your attention and what doesn’t. The very fact that you are “hunting for excuses to eliminate bad, unreliable or biased sources” means you have a ‘meta-cognitive’ position relative to your information sources. You are helpfully transparent about your information evaluation process. I wonder how many readers understand that having a process is the key. That process can be tacit (intuitive) or explicit. Either way, as you note, it “is really the result of 1000s of hours of hard work, research, practice, experience.”

  17. [...] per last weekend’s discussion on info sources, these are the methodologies, organizations, and yes, people whom you should [...]

  18. [...] The Price of Paying Attention  (November 3rd, [...]

  19. [...] is worthwhile reminder of the Price of Paying Attention. PERMALINK Category: Financial Press, [...]

  20. Greg Battle: unsubscribe, unfollow, unfan and unfriend are the cornerstones of a nutritious, low-information diet.

    http://www.thereformedbroker.com/2011/12/30/in-2011-i-learned-that/