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