The Information Glut
“Americans today are literally drowning in information,” observed Jim Owen in an article that I found on the Internet. “Today, we find ourselves awash in a vast ocean of data, what with the Internet, nonstop cable TV news, e-mail, voicemail, faxes, pagers with stock quotes, cellular phones and an explosion of newspapers, magazines and books and well, you get the idea.”
One of the major conceits – if not the foundation – of the Information Age was that more is better. Having two mistresses is not necessarily better than having one. Nor is eating two lunches an improvement over a single one. But information is supposed to be different. The more you have, the richer and smarter you are supposed to be.
Yet, dear reader, most of the people I know seem no brighter than they were before the Information Age began. Most movies seem even stupider then those of the 50s and 60s. Art is even more grotesque. And the columns I read in the Herald Tribune (though it hardly seems possible) seem to be becoming even dumber. Could the Information Revolution be to blame?
“Bandwidth plenty,” as Gilder calls the ability of modern technology to transmit digitized data in almost infinite quantity and almost zero expense, is supposed to be as important an innovation as the Industrial Revolution. “It’s little appreciated,” Jim Davidson writes in Strategic Investment this month, “that economic growth prior to the Industrial Revolution was invisibly meager. Before 1700, it averaged just 0.1% per annum, so glacial that the very concept of `economic growth’ was practically unknown.” The economist Malthus, predicting mass starvation as populations increased, was merely extrapolating from the experience of 4,000 years. During all of history, a man’s output barely exceeded what was needed to survive. If he worked hard, and was careful, and lucky, he and his family would survive. But their margin for error was small. A couple of bad harvests – and people starved. Malthus realized that it would be impossible to feed an expanding population with existing technology. He anticipated a disaster.
But a disaster did not come. Because, as Jim Davidson explains it, “the GDP growth rate began to rise dramatically after 1825 with the introduction of steam power and follow- on technologies associated with the Industrial Revolution.”
In the 1600s, a crop failure at Plymouth Colony in Massachusetts or the Poitou region of France would have been a matter of life or death. But the industrial revolution nearly eliminated the danger. Not only did mechanization greatly increase output per man hour – it also made it possible to ship bulky and perishable produce over great distances. Good harvests from other areas could be loaded onto trains and ships and transported to the troubled region. Today, supplies of food in your local supermarket come from all over the world. A drought in England will have absolutely no effect on your standard of living. A drought in all of Europe would barely affect world market prices.
After the Industrial Revolution, scarcity of food was no longer a problem. That is not to say that everyone was suddenly rich. Not at all, but the tools of wealth creation had been discovered – machines, capital investment, compounded growth, the division of labor. Everywhere that the Industrial Revolution was allowed to function – people were lifted out of a subsistence lifestyle to something entirely different – a lifestyle of hush puppies, cell phones, and summer holidays.
Many people think the Information Revolution offers a similarly dramatic uplift.
“The result of an unfettered Information Revolution could be another major surge in growth, comparable to that in the early 19th century,” Davidson believes. In short, the apparently temporary surge in annual GDP growth to 4.2% since 1995 in the U.S., the center of the Information Revolution, may be part of another permanent upward phase shift in economic potential.”
Alas, information is not wealth. Correctly sorted and interpreted, it may help lead to additional wealth. But that is no easy matter. The more information you have, the harder it is to make sense of it all.
“Data glut has become a serious issue in American workplaces,” continues Owen, “where the average worker spends more than half his or her day processing documents. In the 1980s, per capita paper consumption tripled (to 1,800 pounds annually), and third-class mail grew 13 times faster than the population. Nowadays, office workers can spend hours reading and answering e-mail, not to mention voicemail, faxes, etc. At first a blessing, e-mail has become a curse to those whose inboxes are deluged daily with “FYI” messages and other information that, previously, would have been too cumbersome or time-consuming to deliver in the old mediums.”
Jim Owen quotes David Shenk’s 1997, Data Smog: Surviving the Information Glut, noting that “information overload fuels stress and promotes faulty thinking.” The data glut we all slog through every day at work simply “reduces our attention span” and “makes us numb to anything that doesn’t lurch out and grab us by the throat.”
In short, the increase in `information’ has a very curious effect – one that has not yet been realized. It makes us numb to the subtle details and nuances that we actually observe. Processing information takes time and effort. The more of it that you have to deal with, the more you are likely to seek shortcuts – popular interpretations that lurch out, grab you by the throat and reduce the need for careful reflection on what you actually see and experience.
Instead of actually figuring things out for himself, in other words, the average person becomes even more susceptible to the collective illusions around him. Mob thinking replaces individual thinking – simply because there is too much information for a person to process. Unable to keep up with all the data from Wall Street, for example, he is forced to rely upon the interpretations from CNBC, or popular analysts, or…uh, oh…even the Daily Reckoning.
More about this as I figure it out…
Paris, France November 23, 2000
P.S. It is not as if people suddenly discovered information with the introduction of the silicon chip and the worldwide web. The amount of information available to people has steadily increased with new technology and new material – the telegraph, telephone, television, radio, minitel, teletype, fax…all have increased the quantity of available information. A person in the 20th century had vastly more information than a person in the 16th. Is it just a coincidence that mass-thinking emerged with mass media? What are we to make of the fact that the availability of ideas, information, opinions and communications did not prevent some of the rudest and most appalling notions in human history?
*** The big question today is: Will Santa Claus pay an early visit to Wall Street? The run-up to Thanksgiving was a big disappointment. Stocks fell as corporate earnings softened, the economy suffered, and the election soured. Investors are hoping for better things as the next big holiday approaches.
*** While lower earnings and a cyclical downturn in the economy should have been anticipated, the election was a surprise. A dim Washington Post columnist wrote that it made his Thanksgiving the saddest since JKF was assassinated. The poor sap.
*** On Friday, investors got what they thought was a glimpse of Santa…or maybe Santa’s derriere. The Nasdaq bounced 149 points – or more than 5% – as investors believed they had seen the `big bottom’ they were looking for.
*** “…there’s light at the end of the tunnel,” said one analyst interviewed by Reuters, “especially if the Nasdaq has hit bottom…”
*** But has it? Certainly, not a big bottom. But who knows what holiday plans Mr. Bear is making.
*** The Dow rose too – 70 points.
*** Even with the boost from Friday’s half-day of trading, the Dow ended down 1.5% for the week. The Nasdaq, meanwhile, was down more than 4%.
*** For the year, the Dow is down 9.5%; the Nasdaq is still down more than 40% from its high and 32.2% for the year.
*** Financial reporters are still talking about a post- election rally. But “any Bush rally should be sold,” advises Bill King, “as it is likely to be short in duration, if not in magnitude.”
*** Joe Granville: “Protect yourself in every way you can. Investors [should be] in cash, 91-day Treasury bills, and government security money market funds. Traders [should be] short. All margin accounts should have been closed out last month.”
*** Analysts’ forecasts of profit growth in the tech sector have been trimmed back dramatically. The consensus estimate is now 16% for the 4th quarter. It was 29%. And the first quarter of next year, doesn’t look spectacular either. Analysts scaled back their expectations from 26% to 16%. Estimates for Dow earnings have also been reduced – from 623.12 a month ago to 618.02 now.
*** Junk bond yields are almost twice as high as Treasury bonds – the biggest spreads in 10 years. Sophisticated bond investors see what `degenerate capitalism’ has done to America’s corporate balance sheets – and they don’t like it.
*** But home prices are still rising in the S.F. Bay area. The average house in the area is now selling for $385,000. In Santa Clara county, prices rose 26% over the past year – to an average of $95,000. Houses in San Mateo country rose 27.4%.
*** “We’re no different from other companies,” said a spokesman for the world’s most sensationally unprofitable firm. Amazon’s workers are threatening to unionize – first in the U.S. and now in France and Germany. Jeff Bezos appears baffled. “Everyone is an owner,” he says, including himself along with the $10/hour customer service staff. But the capitalists in the mailroom want more job security, now that people are being laid off and their stock options are becoming worthless.
*** The LA Times reports that lawsuits over stock options are soaring. Employees who get laid off may not go to court over $15,000 in disputed salary – but $300,000 in options is bound to interest some fee-chasing lawyer. In one case, an employee charged that she was fired the day before her options were scheduled to vest.
*** The number of visitors to the top 50 websites rose at only a 2.8% rate in the 2nd quarter.
*** Tokyo stocks were up more than 2.5% this morning.
*** And Hong Kong reports that its GDP is growing faster than expected – up more than 10% over the last year. Hong Kong’s economy is growing nearly 3 times as fast as the U.S. economy. Pity the poor citizens of Hong Kong; they are freer than you and I, they pay little in taxes, but they don’t get to vote for president.
*** Mr. Deshais left us a turkey on the kitchen table. He had cleaned and plucked the bird. Once in the mood, he must have decided to do the job on a couple of geese too – which I found hanging by their necks in the garage as though they had made a suicide pact.
*** Our turkeys are ugly black animals. But Mr. Deshais insisted that they were tastier than the white ones, though not as big. We ate the bird with all the trimmings on Sunday – including a stuffing made of chestnuts the kids had gathered…and sausage. Sweet potatoes, cranberry sauce, pumpkin pie – we might as well have been enjoying our Thanksgiving feast back in Maryland.