Investing Caffeine

TMI: The Age of Information Overload

January 7, 2010 at 12:01 am 5 comments

In raising the issue of TMI (“Too Much Information”), I’m not referring to your parents talking about their sex life, but rather the explosion of data that is flooding our society.

How much data is creeping into our daily lives?  The issue impacts all professions, but is especially acute in the investment world. A recent study, co-authored by Roger Bohn and James Short (Directors at the Global Information Industry Center at UC San Diego’s School of International Relations and Pacific Studies), tackles this elusive measurement problem of TMI.

Everyday Life¹

One need not become a rocket scientist to figure out we are being inundated with information. The average household already receives 120 TV channels, with no signs of slowing. I love sports just as much as the average person, but do I really need six flavors of ESPN? Or seven different HBO channels? Our TVs (a.k.a., “god box”) even carries the “GOD TV” channel. Does this mean I don’t have to go to church anymore?

Data is permeating other areas as well. Microchips are infiltrating our microwaves, refrigerators and automobiles. The average car now contains more than 50 processors, including a butt-warming car seat chip. Suffice it to say, information is becoming pervasive.

Gorging on Information – Zettabytes at a Time

I think most reasonable people would agree the typical person is consuming more information, but exactly how much? Through Bohn and Short’s rigorous study, they determined Americans consumed 3.6 zettabytes in 2008. A zettabyte is equivalent to 1,000,000,000,000,000,000,000 bytes (21 zeroes), equating to about 10,845 trillion words. This statistic translates into the consumption of approximately 34 gigabytes (about 1/5 the storage in a standard laptop) per day by each American.

Put another way, Kathleen Parker at the Washington Post, calculated the total amount of data produced in 2006 was 3 million times more data than the information contained in all the books ever written.

Investor Dilemma: Paralysis from Analysis

There’s no question in my mind that data can become overwhelming in the investment world. Focusing on the endless concerns spewed over the media can lead to investment paralysis. Each in every day I hear why the world is going to end, or why an investment du jour will rocket to the moon. Not only are the messages schizophrenic, but the quantity is unending. As I mention in my book, while I managed a $20 billion fund, I could receive 500 e-mails, 100 voicemails, and hundreds of pages of hard copy reports and faxes on a daily basis. Completely reviewing the data received in a day’s work could theoretically take weeks, if not months.

Today, the voluminous flow is not retreating, but instead we are seeing new avenues of information distribution, including, Twitter, Facebook, blogs, instant messaging, YouTube, LinkedIn, and numerous other social networking outlets. With the 24/7 daily news cycles, and instantaneous transferability of information, the internet has become a convenience but also a source of heightened anxiety levels. Rather than giving up and throwing in the towel, I willfully accept the challenge to navigate through the masses of data. Automated spam filters, topic alerts, and aggregated news readers are a few basic examples of managing data through technology.

The Surplus Solution

The simple solution to TMI is ignoring and filtering the data. This objective is easier said than done, especially for the inexperienced. Deciphering and tracking the endless creation of new acronyms, alone, can become a full-time job for the less familiar.

The best advice, which I continually take to heart, comes from legendary investor Peter Lynch who states:

‘‘If you spend more than 14 minutes a year worrying about the market, you’ve wasted 12 minutes.’’ He hammers home the point that timing the market based on noisy data is a losing cause. “Anyone can do well in a good market, assume the market is going nowhere and invest accordingly,” adds Lynch.

The other option is to simply outsource the responsibility. Time-strapped professionals follow this strategy when it comes to tax and legal advice, but for some reason many ill-equipped individuals feel they can adequately handle the arguably most important aspect of their financial existence…their investments. While finding an experienced and trusted professional can take some time, it is not an insurmountable task (see my article on selecting an advisor).

Follow a Plan

As the accelerating amounts of data rise in volume, individuals can choose from the following options: 1) Embrace the power of technology to efficiently manage, organize, and filter our consumption of data; or 2) Become slaves to its overwhelming control. I choose the former.  Gaining perspective in light of the daily vortex of data we plug ourselves into can be challenging.  Taking a step away from the emotional pressures of the daily grind, and exhaling will help you see the forest from the trees. After taking a breather from the chaos, returning to your long-term, disciplined, systematic plan – designed by you or your advisor – will assist you in taming the TMI monster.

Read Full Article from Roger Bohn and James Short

1.  Data from Roger Bohn and James Short’s 2009 How Much Information? Report.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds and shares of GOOG, but at time of publishing had no direct positions in DIS, WPO, Twitter, Facebook, or LinkedIn. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

Entry filed under: Themes - Trends. Tags: information overload, James Short, managing data, Roger Bohn, TMI, zettabyte.