The Information Wisdom

When Tim Flanagan jokes about assassinating Julian Assange on prime time tv, it not only comes across as a bad joke but also suggests the importance the Calgary Professor gives to insider information.

Stock markets have addressed the insider information decades back, judgments have already been passed (Jamie Olis reduced sentence in 2006) and even behavioral finance suggests that informed investors could be biased.

Information in its raw form has already lost a lot of premium since Reuters was transferring messges between Brussels and Aachen using carrier pigeons. The new age has moved ahead from raw information to interpretation to compression and visualization.

David McCandless work in progress on beautiful information suggests a hierarchy of visual understanding. It is like the Maslow’s hierarchy with data (words, numbers, code, tables, and databases) at the base. This is followed by information (sentences, paragraphs, equations, concepts, idea, questions, and simple stories) where the insider comes in, which McCandless labels as linked information. After this comes knowledge, organized information and concepts. This is concluded by the peak as in wisdom with applied knowledge, axioms, philosophies, principles etc.

Society is still struggling at deconstructing crude information to interpret it. The information overload has overwhelmed us. It’s only after we simplify it can we move to wisdom. McCandless suggests that information design solves information problems and data according to him is not the new oil, but the new soil. There is another interesting thing he mentions is that absolute in not true, relative is.

The whole idea of looking at a group of assets in an index was about simplifying market information, making the asset more understandable, making it easy to monitor. A simple design (indexing) changed the investing philosophy.

Extending his relative idea the author suggests that instead of looking at US defense budget (top budget spender) as an absolute parameter if one looked at budge spending as a % of GDP, the ominous US top rankings become mild and marginal. Comparing the Icelandic volcano carbon emission to the amount of carbon airplanes generally emit (and were grounded for the period), the volcano in question seems net carbon neutral. Information interpretation is a lot about comparison.

There is a lot of information stock markets generate. The next investment ideas are going to come from information compression and design tools. Performance cycles compresses price performance of 500 Indian stocks and rank them for seasonality. It’s a simple and effective way to look at the best and worst. But unlike what David is saying we suggest that information wisdom has a pattern, has a cycle and is a fractal. This again is not hard to prove. Take 10 words and rank them for frequency in a newspaper, webpage or a database. Sort them and see the pattern. Do it a thousand times, you will see the same pattern.