Friday, September 26, 2008

Wealth of Information, Poverty of Attention

342,00 is too many reviews of nail clippers

I suffer from it myself. Information overload. Analysis paralysis. A need to gather as much information as possible before making a decision. With near-infinite information only a Google search away, it is easy to get lost in research and never get around to actually making the decision. The topic of how successful people make rapid, profitable choices has received its own fair share of research lately.

Malcom Gladwell wrote about making quick, instinctive decisions in his popular recent book Blink. The "blink" can be the ability for a mind to process information subconsciously and quickly recommend action, such as a fire fighter sensing that something wasn't right with room and ordering everyone out before it collapsed in flame. But Gladwell also described a concept called "thin-slicing" where experts use narrow information that education and experience has taught them are determining factors in making the right choices.
[A new book and old studies on the subject after the jump]

Jonah Lehrer, author of Proust was a Neuroscientist, has a forthcoming book on the subject called How We Decide. He discusses the overarching concept of how we decide in the context of Warren Buffet this week at his blog, the Frontal Cortex. In it he cites a psychological study from the late 1980s performed on MIT business students:
[Psychologist Paul] Andreassen let the students select a portfolio of stock investments. Then he divided the students into two groups. The first group could only see the changes in the prices of their stocks. They had no idea why the share prices rose or fell, and had to make their trading decisions based on an extremely limited amount of data. In contrast, the second group was given access to a steady stream of financial information. They could watch CNBC, read The Wall Street Journal and consult experts for the latest analysis of market trends.
The limited information group performed almost twice as well as the informed group, who became distracted by gossip and rumors. The more informed group engaged in far more buying and selling, were far more volatile, while the limited information group stayed focused on performing stocks. Too much information made one group over-confident.

It should be noted that the value of "unconscious cognition" is very much debated. Richard Posner, whose blog I have previously recommended and whom I described as one of the biggest brains on the internet, didn't think much of Gladwell's argument when he reviewed Blink in The New Republic: 
Taken together, these literatures demonstrate the importance of unconscious cognition, but their findings are obscured rather than elucidated by Gladwell's parade of poorly understood yarns. He wants to tell stories rather than to analyze a phenomenon.
Posner certainly has a dog in the fight, being very much an advocate of conscious cognition, but he stopped short of poo-pooing the entire concept of Blink out of hand, choosing instead to lambaste Gladwell's approach to it. The door remains open for Lehrer to produce a more convincing argument, although my experience with Lehrer to date suggests he writes very much in the Gladwell mold. Which isn't a bad thing, considering how many books Gladwell has sold. But is not likely to impress a Richard Posner.

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