Posts tagged ‘information overload’

Information Choking Your Money & Mood to Misery

Source: Photobucket

Source: Photobucket

On a daily basis, I make my way into the office before the market opening bell, preparing myself to gorge on a massive heaping of news stories and headlines. But scarfing down tons of tweets and hundreds of headlines is not enough. Magazines, newspapers, conference calls, blogs, presentations, conferences, interviews, television clips, and software lists are but just a few additional aspects to my steady diet of information. Like shopping down each and every aisle of the grocery store, an annoying tendency I admittedly commit, there are plenty of healthy and unhealthy items to choose from. The key is identifying the items that are the best for your financial health. After carrying out this gluttonous information-stuffing business for more than twenty years, I’ve gotten much better at separating the data wheat from information chaff. This is critical in avoiding heartburn for my Sidoxia clients and me.

One might ask, “What harmless headline or innocent anecdote could possibly cause harmful financial indigestion?” I don’t know about you, but in recent months, gobbling down these following headlines without discretion can lead to a serious case of acid reflux:

  • “Stocks Tumble as Bernanke Discusses Tapering” USA Today
  • “China’s Economy is Freezing Up. How Freaked Out Should We Be?” Washington Post 
  • ” ‘Suffocating in the Streets’: Chemical Weapons Attack Reported in Syria” NBC News
  • “Europe’s Zombie Banks – Blight of the Living Dead” The Economist
  • “Threats from Extremists as Egypt Slides into Turmoil” The Times
  • “Japan Market Plunge Sparks Global Sell-Off” Los Angeles Times

I think you get the idea. No wonder investors collectively are acting like a deer in headlights, resulting in declining stock market participation – a 15-year low (see Investing Caffeine’s DMV Economy)

In the world of competitive eating, the execution of improper consumption technique can lead to a so-called “reversal of fortune,” as can be experienced by the last video on my Investing Caffeine article, Baseball and Hot Dogs. Disciplined processes are needed to prevent such an event when devouring excessive amounts of information. This is a timely topic as Joey Chestnut recently set a new world record by eating 69 hot dogs in 10 minutes.

While digesting the avalanche of daily data is quite complex, understanding the harmful consequences of doing so is quite simple. Carl Richards, a contributor writer to the The New York Times and Morningstar Advisor does a great job of outlining the detrimental impact of information consumption on investors’ wealth and happiness through minimalist charts found at BehaviorGap.com.

Here is my co-mingled version of Richards’ work:

Data Consumption vs Happiness

As Mark Twain said, “If you don’t read the newspaper, you are uninformed. If you do read the newspaper, you are misinformed.”  It’s perfectly fine to remain current with major economic, political, and worldly events, but the consequences to overreacting to the ever-changing news flow can be disastrous to your financial and personal well-being.  Managing your life savings can be stressful and if not managed correctly will damage your financial goals.

If you do not have the time, interest, or self-control to digest the massive buffet of endless information, do yourself a favor and find an experienced and trusted advisor that can assist you with the Heimlich maneuver, so you don’t choke on the infinite amount of data.

See also (Investing Caffeine: Age of Information Overload)

www.Sidoxia.com

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs) and CMCSA, but at the time of publishing, SCM had no direct position in GCI, WPO, NYT, MORN or any other security referenced in this article. 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.

July 13, 2013 at 7:21 pm Leave a comment

TMI: The Age of Information Overload

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.

January 7, 2010 at 12:01 am 5 comments


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