Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Surviving in the information age
BackBack

Surviving in the information age

From information hoarding we have to make a shift to information choosing and it's not an easy transition

Photo: AFP Premium
Photo: AFP

In August 2010, Eric Schmidt of Google said that “every two days now we create as much information as we did from the dawn of civilization up until 2003", and since 2010, the pace has only hastened. To put this into a Malthusian construct, human ability to meaningfully process information is growing at a snail’s pace, if at all, and it has to contend with this steeply exponential glut of information. In today’s world, apart from a voice call, one can count at least seven other methods including Facebook walls and WhatsApp messages as communication media. To think about it, from an era of once-a-week trunk calls or postal letters, we end up checking at least seven sources of communication every few hours for new messages. It’s not too different in the markets; just two decades ago, each company in India produced just an annual result and there were only a handful of research houses covering a handful of stocks. While Infosys changed that in 1998 with quarterly reporting, the pendulum has now swung to the other extreme. There are 48 analysts on average covering each of the 50 stocks in Nifty which means that every quarterly result season, a harried investment professional has to contend with 2,400 messages, just on the Nifty names.

The retail investor does not have it easy either. Seven business news channels have burgeoned in the past 15 years, and with a plethora of talking heads recommending new stocks by the minute, it is humanly impossible to keep pace. Gone are the days of eagerly awaited Chitrahaar when as kids we were routinely subjected to a memory test of recollecting all the 10 songs in the right sequence. Clearly, from information hoarding, we have to make a diametric shift to information choosing and it’s not an easy transition. As professional investors, we have tried a few things to battle this barrage.

The most effective way of reducing information overload is self-analysis. Thinking back about what consumed a lot of time but eventually proved to be irrelevant, is a good starting point. In the past few years, we have spent time understanding the Scottish referendum, Cypriot banking system, intricate details of Middle Eastern regimes and their vulnerabilities but as an investor (as opposed to a day trader) it would be difficult to pin-point these events on the stock market chart. Closer home, at one point, we obsessed over the impact of mobile number portability on the market shares of telecom operators or on de-regulation of savings bank rates on market share of deposits for large banks—neither events produced even a blip on these metrics. We are prone to focusing on maintenance information which is more about next few days and weeks rather than thinking about long-term trends. In the words of the legendary Barton Biggs “...I tend to set aside the reports and articles that I know I really want to read carefully, with the idea that I am going to go through all the maintenance stuff and the junk quickly and then focus on the heavyweight material. What happens, unfortunately is that the maintenance material takes longer than it should and I end up carrying around the good reports in my briefcase...In other words, I have processed the junk and haven’t read the good reports".

Guy Spier in his book The Education of a Value Investor talks about how he has split his office into a busy room with phones and computers, and a library where no electronic devices are allowed. The library is meant for immersive reading or thinking. In our information gluttony, we hardly spend time assimilating thoughts and in the absence of a good digestive system that converts foods into useful nutrients, information consumption is just Garbage in, Garbage Out. It is in these sessions of information Sabbath that the probability of Eureka moments increases. Remember, Archimedes was not hunched over his smartphone but was taking a long soaking bath when that flash of brilliance came.

As Charles Assisi pointed out in his recent column in this newspaper, when social media is the primary source of information, there is a risk of getting into an echo chamber like environment. Algorithms highlight and push information and opinions similar to what one has consumed in the past, making all inputs monochromatic. It is essential to seek out information that is contrary to one’s beliefs, which in investing terms means reading the sell reports on your largest portfolio holdings first.

In chess, it is now fairly well established that a combination of man and machine is superior to either of them. Use of technology can definitely improve one’s ability to sort through information. Michael Mauboussin highlighted this in one of his recent reports that aiding one’s bottom-up stock picking with quantitative screeners will likely enhance results and so will seeking out information through Internet alerts or Twitter, rather than passively consuming whatever is being pushed to you.

Finally, the most important skill is to let go—reconciling to the fact that there will always be many things out there that one possibly cannot know about. The insecurity that one is missing on a vital piece of information leads to mindless consumption. It’s like spotting a pasta counter tucked away in a corner at a wedding reception, after having finished dessert. Have you missed out on the best dish in the buffet? Will you grab another plate or be content with the fact that you have already had a good meal and cannot consume every offering on the menu?

While the era of information overload might be a recent phenomenon, Sherlock Holmes nailed the issue about 125 years ago. When Watson chides him for not knowing that the earth goes around the sun, Holmes says that one’s mind is like an empty attic and one should be very careful about what one stores there and that whether the earth goes around the sun or the moon is of the least consequence to him and his work. Attaining a Holmes-like Zen state of information processing is a tall ask, but that should not deter anybody from making a start.

Swanand Kelkar and Amay Hattangadi work with Morgan Stanley Investment Management. These are their personal views.

Comments are welcome at theirview@livemint.com

Follow Mint Opinion on Twitter at https://twitter.com/Mint_Opinion

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 22 Mar 2015, 06:36 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App