Information Toxicity in the Age of Real-time Everything
We live in the age of information, but that doesn’t mean that information is always beneficial. The term ‘big data’ suggests that large quantities of information drive much of today’s innovation. So how positive is information really? As with any substance, the quantity makes the poison.
Even if industrial applications and technology companies use vast amounts of data to create economic value via statistical filters and intelligent computer analysis, the human brain does not have such a logical approach to all of that. The mind’s normal function is actually impeded by an excess of information.
Consider news channels and media coverage of current events. Events like the Octobre 2013 US government shutdown may have cost a huge sum of money and made some investors very unhappy, but its importance in the grand scheme of things is very limited, so what do people spend hours reading articles about it, especially the coverage prior to the resolution i.e. purely hypothetical blabbering? With the ease of publishing through the Internet and TV, a wealth of articles is created at the expense of quality, and the need for up-to-date reporting produces vast amounts of what a statistician might call ‘noise’. If you review a year’s events at the end of the year, possibly by reading a good Wikipedia article on the subject, you will, in a short amount of time, get all the information you need (and much more than you need, actually!) without spending hundreds of hours of your life reading variations of the same coverage.
The same principle applies to investing as well, as Nassim Taleb explains in the excellent ‘Fooled by Randomness’ where he shows how daily checking of stock prices vastly magnifies the amount of noise. If you track your stock prices every 10 minutes, chances are you will be strongly emotionally affected by what you see and try to find an explanation for (or, worse, decide on an appropriate reaction to) each of the price movements. Less frequent checking, say weekly or monthly or quarterly, however, increases the signal and reduces the noise considerably, and therefore makes for much more serene and intelligent investing.
So should we all stop reading the news and checking our investment performance?
No. We should just consider the frequency at which we do all these things critically and think about whether reducing it would be beneficial. I’ve switched from daily stock tracking to doing it just one a week, on Friday night, and it has spared me the anguish of a bad day, since the other weekdays more than make up for one or two bad days (until now). I also used to be a news junkie, in part because I translate news articles for my job, but I generally do not browse news homepages daily anymore. I prefer to read the Economist’s weekly Kindle edition when I have some free time to really enjoy it. Newspapers like the Economist also have a way of taking a step back and giving you some background on articles as well as taking a broader view than just the daily events, since it’s a weekly newspaper, and that is something I quite enjoy in the age of push notifications and realtime coverage.
When you’re working on a laptop all day long, it definitely feels good to do some ‘slow reading’ on a Kindle, even if it’s the news, because you’re removed from the constant links to the next page, and the lure of an endless surfing session.
I’d recommend to anyone with an information overdose, as I used to and still sometimes have, to take a step back, breathe and stop staying ‘in the loop’ all the time. It even feels good to turn off e-mail notifications on your smartphone and deal with e-mails when you want to, not when someone decides to send you one. Very few people actually need realtime information on anything, and those who do have to lead pretty unhappy, hamster-in-a-wheel kind of lives.
Don’t be a hamster.