Information will not make you wise, but wisdom can turn information into intelligence.
February 17, 2013 5:07 by kippreport
We live in a world full of information. But how do we convert all of that information into intelligence? Through the application of our own wisdom, perhaps. After all, information will not make you wise, but wisdom can turn information into intelligence.
Information is freely available, unfortunately people’s attention is not. Too much information, even when accurate, can hide important factors.
Information adds to complexity. When people are confronted with situations they perceive to be complicated, they become confused and find it more difficult to take action – they procrastinate.
Education increases information. Increased information can lead to over-confidence and optimism. The perception of mastery. Admitting your mistakes becomes more difficult as you see yourself as competent. You feel in control, and the last thing you need is contradictory evidence – so you ride roughshod over negative indicators and plough on with your decisions. I’ve heard it said that “optimism is a great companion but a poor guide” – I think we all need to remember this.
We’ve heard about the “law of averages” (which is actually the ‘law of large numbers’), but have we heard of the “law of small numbers”? This law causes us to draw strong conclusions from too little data (e.g. the past three years’ performance of a fund, or even our own decisions over the past year). Through this limited window of experience we exaggerate and over-value our own experiences and reduce what can be learnt through studying other people’s experience or longer-term trends.
Even today, the most well-used source of information remains friends and family – more so than books, websites, newspapers, newsletters and formal study. Ask yourself, “how much more do they really know than I do?” We often credit others with as much knowledge as we, ourselves, have – and then some, thus our decisions can be based on their judgements.
Experts and professionals make mistakes, too. They also suffer from problems associated with optimism and over-confidence – it’s no use them sounding tentative – who is going to pay them if they don’t at least give you confidence that they know what they’re talking about. And, to make a bad situation worse, studies have shown that decisions made with almost no expertise are often better than those made where stats are available. And these are often better than those made when the expert can have direct and personal contact with individuals involved.
And when it comes to finances, information can be especially dangerous. The need for correct, up-to-date information when it comes to money matters can not be underestimated. Here are some key pointers:
- Be clear about what it is you are trying to achieve, and how much money you will need to achieve it
- Take advice from a professional, qualified and competent adviser who has your best interests at heart
- Protect your life, your health and your family (your real wealth)
- Save money regularly so that saving becomes a habit, like breathing
- Review your progress with your adviser
- Be sure you stay in control of any advice you receive
Contributed by Peter Ellen, Operations Director at Nexus Insurance Brokers. MENA Insurance Awards 2013 Personal Lines Broker of the Year. Insurex 2008, 2009, 2011 & 2012 Personal Lines Insurance Broker of the Year. Best International Takaful Brokerage Award 2010. Recipient of the prestigious 2009, 2010 & 2011 Training Award.