Information comes at us from all sides, these days. We have smart phones, smart cars, a smart electric grid, and I can check the latest sports app to see my nephew’s downhill skiing results in real time.
What do we do with all this data?
The easy answer is to ignore it. Or at least to ignore the parts that we don’t like. If we don’t want live tweets of the air traffic of the coast of England, we don’t need to follow them. But that forgets the fact that more data are available. Not just self-styled pundits in the blogosphere, but real-live data. With the right screens and feeds anyone could have known about the Libyan bombing or Greek rioting before the images went live on CNN.
The key is to understand the difference between data, information, and knowledge. Data is raw numbers: ones and zeroes on a digital drive. It can be massaged, managed, and manipulated. It’s the basic stuff of life. Twitter feeds are often raw data. Information is that data coalesced and managed. Government labor reports and company outlooks are information. Think of data as nutrients and information as different types of food.
But information isn’t enough. Different foods need to be combined into meals. That’s knowledge. Knowledge combines the BLS employment report with Census data to conclude that more people are retiring, and they’re not coming back into the labor force, so there won’t be an army of discouraged workers re-entering the workforce soon. Knowledge helps us understand that low bond yields and a strong corporate sector portend healthy equity returns over the next 10 years.
By recognizing these distinctions, we can start to make sense of the information overload we experience every day. And use improved knowledge to make better decisions.
Douglas R. Tengdin, CFA
Chief Investment Officer
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