Risks of Information Overload

When I learned to fly, I had six mechanical gauges in my plane that gave the basic information needed to keep the plane right-side up and flying straight. In flight I navigated using radio signals emitted from ground-based systems across the country. I also had maps that identified landmarks allowing me to see out the window to guide my path.

Weather planning was done by speaking on the phone with an FAA weather briefer, but my most important weather information came from walking outside and looking at the sky. You can learn a lot if you know what to look for. Once in the air I would visually monitor the weather, and if something ugly like a thunderstorm appeared, I would just fly around it, land, or turn back.

Today the highly advanced technology in my plane allows me to see weather all over the country in real time. I can “look” through a cloud in front of me, measure how much water it contains, see any lightning, and determine if my plane has the capacity to fly over it. Prior to the flight I have endless online weather services to give me more information than I thought I ever needed to know.

All this technology has created a new risk for pilots; Information overload. So much data is available to make flying safer, that in some ways it has made it more dangerous. Pilots focusing on all the data sometimes get distracted from actually flying the plane, or their skills deteriorate from lack of use. To overcome this risk, I regularly train by turning everything off and hand-flying my plane the old-fashioned way.

The investing world of 2021 is bombarded with far more information than can be reasonably digested. My son Jayden recently joined our team and is training to become a financial advisor. We have begun by teaching him to read financial reports, study market conditions using his own observations and common sense and come to investment decisions based on his own experience. In short, we are teaching him first to look at the sky and see what it is telling him. The mountain of data at his disposal can be far more useful if he first learns to make decisions using the unique observational skills humans possess. Then he can properly assess which information is most valuable. When it comes to information, more is not always better.

Many of the questions our office receives demonstrate that investors are being overloaded with increasingly more information that is becoming less useful to them. Endless headlines, graphs, charts, robotic analysts, and questionable stock recommendation in the inbox or reddit page, are distracting from proper decision making. This mountain of information has added new risks to investing.

I suggest investors and their advisors be aware of the risks of information overload and make a conscious effort to control the quantity and quality of the data you consume each day. Most of it you don’t need, to make good decisions, and much of it is harmful.