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Matt Holland

Writer (In Training)

The Information Advantage – A Mental Model To Get Ahead (Part 2)

Read time: 6 minutes. Click here to watch my video on the topic.

Welcome to part two of my information advantage series. The purpose of this short series is to provide you with a mental model to use when thinking about information. Last time I’d mentioned that to simplify my worldview I’d probably settle on looking at it from two perspectives: information and energy.

Humans have looked for advantages to get ahead of others throughout history. It’s a part of our competitive nature and why we are the dominant species on the planet currently. I believe a big part of our dominance is our information advantage. Last time I posted about information inputs, quality, storage, distribution, processing, and computation. Our efforts in improving all of those areas have lead to fantastic progress for our civilization. However, what has really given us the edge has been the areas of information I’ll be discussing here: knowledge, unlearning, application, and usefulness.

Knowledge & Unlearning

Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information? In our age, men seem more than ever prone to confuse wisdom with knowledge, and knowledge with information. – TS Eliot

Knowledge Is Not Equal To Information

Knowledge is created by processing relevant and objective information to draw conclusions through reasoning. You need a metaphorical key to unlock knowledge from information. Well, you need many keys and generally in a particular order. As you unlock one door of new knowledge there are other doors presented to you. You can only turn the key to open the door once you’ve internalized and understand the information. There seems to be an infinite number of doors to open and you can always go back through the ones you’ve been past.

In 2007, Charlie Munger delivered a commencement speech at USC where he told a story about physicist Max Planck. The story began with Planck touring Germany to give lectures on quantum mechanics while his chauffeur was driving him around and attending each one. Eventually the chauffeur had been to so many of his lectures he’d memorized it and asked if he could give the next lecture. Planck took him up on the offer.

The next lecture came and the chauffeur delivered the information exactly as Planck would have until the questions came. A physics professor in the audience asked the chauffeur a second-order question that stumped him. Only Planck could answer the question because he had the background knowledge to support the content of his lecture. Memorization alone does not turn information into knowledge. Munger concluded that there are two types of knowledge with the first being “chauffeur knowledge”. It’s surface level information regurgitation with no real understanding. Then there is “Planck knowledge”, which is having a deep understanding of the reasoning behind the information. Strive for Planck knowledge

TS Eliot created an organizational knowledge pyramid, sometimes called the “Data Information Knowledge Wisdom” (DIKW) model. It provides a way of differentiating between each of those concepts. He stated that data is discrete objective facts about an event, information is a message meant to change the receiver’s perception, knowledge is experience applied to the message, and wisdom is the collective application of knowledge in action.

According to TS Eliot, information turns into knowledge through comparisons, connections, consequences, and conversations. Essentially through the actions of critical thinking and processing the information. If all you do is memorize and regurgitate back then you’re basically a computer hard drive. There is no knowledge creation when this is done.

The creation of knowledge takes thought and energy. We can use our brains to create this knowledge through active effort. Last post I’d mentioned that we like to use computer software for the storage, distribution, and computation parts of the information mental model. We also use computers as a tool to help us turn information in knowledge. This has naturally lead to many software information products. If you can make a problem an information problem you can solve it with software. This has become even more relevant today because information supply far exceeds our capacity to process it. These tools help us manage the information supply to learn better.

Unlearning is another component of my mental model. It is the process of discarding outdated information and knowledge. Sometimes new information and knowledge will fill that gap and other times there is nothing to fill. When the rate of new information production is as high as it is today, then the new displaces the old quickly. Sometimes “knowledge” is just our best guess at the time. Since outcomes and circumstances change with time, then so does knowledge. However, the closer the knowledge is to a first principle the more likely it is to remain knowledge through time. Creating knowledge and unlearning go hand in hand. Both are required to stay ahead and keep your information advantage.

Application & Usefulness

“Information is everywhere but its meaning is created by the observer that interprets it. Meaning is relative and there is no objective, over-arching meaning.” – Naval

The application of knowledge is what makes it useful. It’s no good just staying in your brain collecting dust because productivity is knowledge in motion. My current career, like many “knowledge workers”, revolves around manipulating, processing, and communicating information. The better you are at working with information generally the more successful your career is as a knowledge worker. I believe that a person’s ability to work with information can always be improved through learning and having a growth mindset.

A newer element to being a knowledge worker is the usage of computers. The more computer literate you are then the more of you have an information advantage. This is because the more skills you have with computers the more able you are to use them to their full potential. Computers by themselves are not useful until we do something with them.

One of the most applicable areas for the information advantage is in decision making. It’s been said that decision making is what defines your outcomes over a long period of time. Think about the 5 biggest decisions you’ve made in your life so far. It could be where you live, what you studied, who you choose as a partner, saying no to something, saying yes to something, or many other possibilities. When making those decisions you used the information available to you at the time and processed it in the way you knew how. The result of those decisions have ultimately shaped your future.

Having better information or being able to process it more intelligently creates an advantage in decision making. For example, insider company information provides the person with it a huge advantage in the stock market. Regulators will try and prevent activities like insider trading in order to level the playing field in financial markets. After all, people like to play fair games and there is a lot of trust required for that. High frequency traders also have an information advantage because they’re getting their data faster than you are. These types of scenarios play out in many different areas on both personal and business levels.

An important component of the information advantage is to use it ethically. Any advantage by definition, whether information or otherwise, creates inequality. When you have an advantage you are no longer equal to the person who does not have it. There is nothing intrinsically right or wrong with that, it’s just the way it is. What you do with that advantage is up to you and your ethical principles. I’m not here to tell you what yours should be but I recently posted about my 10 guiding principles for personal decision making which you can read here if you’d like.

Final Thoughts

Using my information mental model allows me to make sense of the world. I can overlay it onto my current understanding of a concept at any time and gain some new insights from the process. The topic of information is vast and I have barely explored it in this series. I plan to continue to refine my understanding of it through future posts, with the addition of some visuals, and also hope that this series introduced you to a new way of simplifying your worldview.

The final frontier of the information advantage is taking ethical action. You can have the greatest information in the world but if you don’t take action then it doesn’t matter. Have a bias for action and I think the information advantage can serve you well. Remember to think for yourself and think different.

I appreciate you.

M

References:

  • https://en.wikipedia.org/wiki/DIKW_pyramid
  • https://www.inc.com/carmine-gallo/a-simple-test-buffetts-partner-uses-to-decide-who-to-trust.html

My thoughts are subject to change and I will get some things wrong. I promise to keep learning and strive to keep doing better. I'm by no means an expert on any topic I may write or make videos about so always do your own research as well. I try to keep an open mind. If I can teach you something and also learn something from you then I'm doing what I set out to do. Thanks for reading. These are just some thoughts.


“Do the best you can until you know better. Then when you know better, do better.” – Maya Angelou

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