Too Much Information is Bad for Investing

I am a member of a couple social media groups about investing. Things like facebook, investagrams, and reddit at first glance are helpful, supportive communities that can help you become a well informed investor. But recently, I have been re-reading the investing book of Nassim Taleb’s Black Swan, for obvious reason that we are currently in one, I realized that these social media groups and communities would create more harm than good for a person investing in the Philippines.

Why is this so?

Let me explain. Its only common sense to search for people that have the same interests as you, like investing in stocks and what not. But when you arrive at this community and stay there for a bit longer, you will realize that not everyone is at the same level of understanding as you. You either 1) know so little that you can’t comprehend (fixable by knowing the basics like fundamental analysis) 2) you know too much that people think you’re dumb (this is hard). There is no middle ground as I have realized, that middle ground is the exception. Its the thing that is hard to find.

Warren Buffett and Charlie Munger has said to find a person that you can talk to about investments. Because its going to be a difficult road to be in alone. And I agree. I realize that its not something that a large group of people could do together. That’s why the Graham group consisted of the first value investors taught by Ben Graham was just a small group. Eagles never flock as Munger puts it. And investors are eagles. But it helps if you can talk to someone of your level from time to time to bounce of ideas without spouting conspiracy theories of how the pandemic started and why China deliberately did that to ruin other world economies.

Exciting that those theories may seem, its just noise. Just garbage. And it damages your brain.

I have quit facebook groups, reddit and investagrams for the same reasons. All I see are noise, just garbage and I realize that I have just been wasting time participating in these communities. Time that could have been better put to good use like learning a new skill or reading annual reports. I was guilty of trying to educate people in social media about value investing, to my demise. I will just focus on this one little place on the internet where I can write what I want the world to know and let people take it as it is or leave it for being useless. Its up to you, dear reader.

More information = more garbage

Back to Taleb’s book. There was an experiment conducted to know if people would make better decisions if there are more information being fed to a person. What they found out that the more information you give, the worse the decisions get. Now imagine social media, investagrams, reddit for a moment where every minute there’s someone who have a new theory that’s not even reliable and gurus just wanting to sell you something (doesn’t even work), your brain doesn’t distinguish between information and garbage. What it heard or read will stick to your mind and will affect your decision later on. This is called anchoring bias.

The brain thinks its knowledge and become confident of that knowledge it acquired and then you will subconsciously use that knowledge to make decisions not knowing that the knowledge you acquired is first and foremost just garbage. In other words, brain doesn’t want to work hard. So it will use the thing that is most available in memory. Even if that thing is garbage. As long as it sticks and its easy to remember, the brain will use it. Be careful what you feed your mind. Be careful of what you read and listen to. Most important, be careful of the things you speak of. Those are the actions that only compounds the problem.

And to top it all off, even if you know it is garbage, like I do. It will still leak into your brain and stick there. There is just no immunity to it. That’s why Warren Buffett is in Omaha, away from Wall Street, always locked up in his room reading. Actually a great number of great investors are away from Wall Street and away from the center of gossip and financial information.

Because we are not immune to this, we should be the one to get away from it. Like Oddysseus and the sirens story. Its just a wise thing to do.

A picture of Oddyseus. Oddysseus asked his men to tie him up knowing when the sirens sing, he won’t be able to control himself by throwing himself off the ship and drown.

We must become Oddysseus, accept that we can not control our brain at to what information that goes in and it does not know if the information is good or bad. And so, the best way to combat this is to avoid it.

But there is also a benefit in a group

I am not saying that every group gathering is bad. What I’m saying is that the quality of the group matters. It doesn’t have to be a large group. A group of 2 or 5 is good as long as each member of the group are of the same level and bounce of ideas objectively. This is a good thing to have, and one that great investors have in common.

We have a discord group for value investing, if you fancy to connect with other value investors:

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