Investment information - Do we really want it all?

 

Investment success is all about gathering information and using it to create a decision edge. Unfortunately, we are drowning in information. The excess of information means that we will not always see pertinent facts. There is a problem of inattention. We also don't always want to know all the facts.  There is a problem with the reaction to information.

We often look for information that will give us positive feelings and avoid those facts that will create negative feelings. Facts don't have feelings, but the people looking at the information do, and that causes problems with avoidance. There also is a desire to look for confirming information which usually gives us good feelings. The contradictory information is going to give us negative feelings. There will be information that we don't want to know. We will go out of way to not use information if we think it will not make us feel good.  This is not just an investment problem. 

Information will also have instrumental value which can either be positive or negative. Still, we will want to avoid bad information that conflicts with what we want to hear. I don't want to read the warning level that may be associated with a favorite activity. 

Information is always subject to a cost benefit analysis by the receiver of the information, so we must  always ask, what is our willingness to pay for any set of information. The willingness to pay (WTP) is not the same as the price of information. 

In a more general case, what will you pay to have warnings labels or labels on nutritional value? In the investment case, what will you pay for more information on companies? What is the WTP for different pieces of data. Will you use all the information that is available. What is the price for that data?  

In the case of SVB bank, the data was all available. Was it used? Did investors and depositors want to hear this information? 

Some of these issues are discussed in an older book by Cass Sunstein, Understanding What You Don't Want to Know. It is worth a read to think about how we use information.