Photo: Intel Free Press. Source: Wikimedia
Information comes at us from all sides. We have smart phones, smart cars, a smart electric grid, and I can check the weather in McMurdo Station, Antarctica on my smart watch any time I want. 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 need. 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 ignores the fact that more data is available all the time. With the right screens and feeds you can check ER wait times or traffic problems across the US. One of my favorite pictures is a map with all the traffic jams caused by people stopping to watch last summer’s eclipse.
Screen shot from 6:40 pm, 8/21/17. Source: Google Maps
The key is to understand the difference between data, information, knowledge, and wisdom. 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. 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 rising bond yields aren’t always a bad thing.
Knowledge may be the meal, but wisdom is having a healthy diet: the combination of protein, carbs, fats, and hydration we need every day to fuel our minds and bodies. It’s not enough to have a nice dinner. We need to have a plan to take care of ourselves. Wisdom is like that, pulling everything together to bring order to our lives. Wisdom helps us assemble a balanced, diversified portfolio that we can live with.
Photo: Victor Hanacek. Source: Picjumbo
By recognizing these distinctions, we can bring some order to the information overload we experience every day. Hopefully, we can grow in wisdom so we can make better decisions.
Douglas R. Tengdin, CFA