Intelligence Hierarchy: Data, Information, Knowledge, Wisdom

We have been having a series of interesting discussions lately on various aspects of the economy and markets.

I notice that some traders have a hard time discerning between different aspects of the intelligence hierarchy. They obsess about data,  but get lost in it. losing the ability to create context and meaning. They have information, but they lose site of its meaning with the broader context. Even some folks with knowledge fail to apply it appropriately.

Here is how I think about these 4 elements:

Data: Data is the raw building blocks; it consists of raw numbers, but lack context or meaning. 1,200, 9.6%, and  $170k are all piece of data.

Information: Is the application of structure or order to data, in an attempt to communicate meaning.  Knowing the S&P500 is at 1,200 (up 5% YTD), Unemployment is at 9.6% (down from 11%), and GDP is 2.5% (revised from 2%) are examples.

Knowledge: An understanding of a specific subject, through experience (or education). Typically, knowledge is used in terms of a persons skills or expertise in a given area. Knowledge typically reflects an empirical, rather than intuitive, understanding. Plato referenced it as “”justified true belief.”

Wisdom: Optimum judgment, reflecting a deep understanding of people, things, events or situations. A person who has wisdom can effectively apply perception and knowledge in order to produce desired results. Comprehending objectively reality within a broader context.


Chart via Information is Beautiful

See also infosthetics


UPDATE: December 2, 2010 5:46am

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