“The only source of knowledge is experience” - Albert Einstein
Blog 46 starts on how people can gather good information. Last week we discussed why news is generally a poor source of information so what should we look for and where should we go to look for it?
The anatomy of a decision - Information gathering
The role of information gathering
Information gathering has three key pillars. 1) Working out what you know about your decision 2) Identifying good sources to work with 3) Working with the sources to fill in the gaps with credible information.
What do you know about your decision?
It is easier to chunk up a large decision into smaller decisions. A good place to start is to think about which features of the large decision matter. An example is buying a laptop. How fast does it process information? Screen size? Memory? Price? Security? How many ports does it have? Is it touchscreen? etc.
These choices are often overlapping e.g. certain processor speeds are more expensive than others, and certain security arrangements push towards more or less open platforms. It's best to do this stage without applying filters or trade-offs, and you might also come across some additional features as you source information. It is unlikely that you will capture all the relevant features that matter the first time you brainstorm so keep an eye out for extra ones when you engage your sources.
It's sometimes important to unlearn
Background knowledge is great but be careful what you consider knowledge. Long-time followers of my blog would know that sometimes, what we consider knowledge could be out of date, based on incomplete information or derived from a source that is not credible. Part of the information gathering process is to unlearn our biases and not blindly follow our intuitions.
I am not a huge fan of listening to ‘everyone should have their say’ debates. Hearing lots of uninformed opinions might be useful for politicians, as they have to understand what most people think in order to secure their votes, but it rarely helps you if you are after factual truth.
Efficient information gathering needs 2-3 credible sources to have a decent read of the information. So what is a credible source?
1) Experienced (they have actually done what you are asking them about)
2) Incentivised to give you their unbiased opinion
3) Data-driven or can draw on sufficient numbers of examples to support their inferences
Primary sources, people that have first-hand evidence of a subject are more credible than second-hand sources (e.g. journals, academics). There are many ways you can speak to a primary source, but interviews, surveys, observing how they do things or getting access to their statistics is a great way to get good information.
Secondary sources should be used with caution. After having read a few academic journals on subjects I have first hand experience on, I can see that these are often quite superficially correct (or even sometimes not) but have huge gaps in when their hypotheses might be wrong. Queen Elizabeth once asked why economists did not predict the Global Financial Crisis, my answer would be because, they are not incentivised through making good predictions, more so publishing interesting research. The hedge fund greats are much
more credible on that subject and even they often get it wrong.
When working with sources you will also uncover considerations you had not previously thought about and can add that your set of features.
Most sources are bad sources. People use bad data sources unwittingly:
i) Anecdotes (politicians love to trot these out)
ii) News (the writer is likely not to be experienced, not incentivised to be objective and unlikely to be trained to handle the data)
iii) Agents or advisors who are paid/incentivised when you transact (they will not be able to stop themselves biasing their advice with reasons for you to transact)
Filling in the gaps
Whilst different decisions need a different degree of due diligence (a nuclear reactor should be done with a high degree of due diligence), the 80/20 rule definitely applies i.e. you will quickly be able to get up to a general understanding fairly quickly, but to get to an expert level of understanding will take a lot of time. This is a choice that is dependent on what the decision is but also dependent on the personalities involved. Some people prefer a general and wide understanding, but others can get very deep into one or more of the considerations. We will tend know whether we under-investigate or over-investigate, both have costs down the line so should be accounted for.
How is this all relevant to decision-making? Here are three take-aways I want to leave you with before we pick it up next week:
1) Good information gathering starts with chunking up your large decision into lots of small decisions or features. This makes the large decision less overwhelming and makes sure you find out where your gaps in information are.
2) Good sources are experienced, incentivised to tell you the truth and data driven. Evidence is best collected 'straight from the horses mouth' (for those who love an English saying).
3) Collecting information follows the 80/20 rule. Know where your time is best spent to go deep and when it is best spent going broad. Don't let your inner geek nerd out on something nor gloss over something important because you are too impatient to wait.
Thank you for joining. Next week - 'The outside view'. Don't forget to sign up to the subscription list.
Other blogs in the 'Anatomy of a decision series'