Turning off the news and tuning into the flow
- April 16th, 2013
Over the weekend Rolf Dobelli, author of the forthcoming The Art of Thinking Clearly, had a piece at The Guardian on the dangers of reading the news entitled: “News is bad for you – and giving up reading it will make you happier.” This piece wasn’t new to me because I cited an earlier version of this piece in my book, Abnormal Returns: Winning Strategies from the Frontline of the Investment Blogosphere in a chapter on smarter media consumption. In that chapter I write about the dangers of inveterate news reading and the value of a “news diet” for investors.
Dobelli’s piece not surprisingly it got a lot of play amongst the news reading crowd, because it attacks head on the habits of many on Twitter and the blogosphere. Hamish Mckenzie at Pando Daily took Dobelli’s point and pushed it even farther. McKenzie notes how if reading the news is bad, then “Twitter is cancer.” Twitter is essentially the news on crack coming at us a mile a minute, 140 characters at a time. McKenzie writes:
In fact, Dobelli’s argument might be even more relevant to Twitter than it is to news. That’s partly because our Tweet streams are all just a continuously updated “news” page, feeding us morsels of information ranging from the inane to the important that distract our attention all in the name of captivating it. If news is a creativity-crushing attention sap that makes us sick, then Twitter must be like the malarial mosquito that acts a more portable vector for the wider disease.
In a sense Twitter is re-wiring our brains, and not necessarily for the better. Dobelli writes:
News works like a drug. As stories develop, we want to know how they continue. With hundreds of arbitrary storylines in our heads, this craving is increasingly compelling and hard to ignore. Scientists used to think that the dense connections formed among the 100 billion neurons inside our skulls were largely fixed by the time we reached adulthood. Today we know that this is not the case. Nerve cells routinely break old connections and form new ones. The more news we consume, the more we exercise the neural circuits devoted to skimming and multitasking while ignoring those used for reading deeply and thinking with profound focus. Most news consumers – even if they used to be avid book readers – have lost the ability to absorb lengthy articles or books. After four, five pages they get tired, their concentration vanishes, they become restless. It’s not because they got older or their schedules became more onerous. It’s because the physical structure of their brains has changed.
A couple of weeks ago I wrote about how Twitter is the “ultimate dopamine dispensary.” Something that investors need to approach with a fair bit of caution. I wrote:
Twitter is like anything else a tool, a tool that we need to use with care and caution. Investors therefore have to make an important calculation. To what degree are they willing to miss out on certain information in order to avoid the time and energy required to wade through the daily dross? Every investor has to answer this question for themselves, usually through some process of trial and error. What investors need to avoid are the high costs of becoming addicted those dopamine hits that come so easily on Twitter. In the end investing isn’t about the temporary euphoria of novel information but putting into practice a well thought out, long-term investing strategy. Something that rarely gets those dopamine receptors humming.
Josh Brown at The Reformed Broker has in his own way has got this conundrum figured out. In a post riffing on Dobelli’s he notes how is by immersing himself in the news flow he is better able to identify those things that are truly irrelevant. Brown writes:
I’m always consuming the news. That’s my secret.
I’m living inside of it, swimming in it. And I know how it gets made, who makes it and what the motivation is behind all of the stories and breaking blasts and so on.
I know how and why one thing becomes a news story while another thing is overlooked and forgotten about.
And as a result of this bombardment, I am almost totally immune to it. I consume it and discard it. I take what I want from it and move on. I never get scared and I never get euphoric and I almost never react or make big decisions based on it.
Unfortunately few investors have the time or ability to do what Brown does. One of the reasons we investors consume the news is that we think it will provide us more information with which to make better, more profitable decisions. We think this incremental information will somehow give us an “edge.” The challenge with this thinking is that more information may increase the confidence in our decisions but it does little to increase their accuracy. I would argue that it isn’t the latest information that makes us better investors it is the ability to analyze the news and information in a dispassionate way that provides investors with an edge. From my book:
The news itself is often less important than the reaction to the news. By disconnecting from the often entertaining and always enticing news flow, we can better see the crucial interplay between what happens and how markets react. This perspective is difficult to achieve under the best of circumstances. If you are inundated with the noisy media, it is nearly impossible.
News is bad for you – and giving up reading it will make you happier. (The Guardian)
Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere (Amazon)
If news makes us sick, Twitter must be cancer. (Pando Daily)
Twitter as the ultimate dopamine dispensary. (Abnormal Returns)
My news consumption secret. (The Reformed Broker)
More information=more confidence=more problems. (Turnkey Analyst)
Abnormal Returns is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small commission, yet you don't pay any extra. Thank you for your support.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Abnormal Returns has over its seven-year life become a fixture in the financial blogosphere. Over thousands of posts we have striven to bring the best of the financial blogosphere to readers. In that time the idea of a “forecast-free investment blog” remains as useful as it did six years ago. More »
- Beware backtests built to anchor expectations
- Thursday links: losing money just the same
- Wednesday links: not all risks
- The small act of kindness holiday book giveaway
- Tuesday links: bad portfolio eggs
- Monday links: changing views of art
- Sunday links: history of bubbles
- Top clicks this week on Abnormal Returns
- Saturday links: nothing new under the sun
- Friday links: stop doing things