ARTIFICIAL INTELLIGENCE

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First Comes Data, Then Comes ...
 

A Marriage In Artificial Intelligence
by D.M. Wong, Ph.D.

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Can you really make better decisions with more information? Perhaps artificial intelligence has the answer. Find out how you can develop skills to gain control.

There are content-drenched websites such as TheStreet.com, CNBC.com, cbsmarketwatch. com, and so many more. Add to these all the subscription-based investing magazines and newsletters that are available. Can there be any doubt about our thirst for information? We tend to assume that people can make better decisions with more information. The logical extension is that people will make even better decisions with even more information. But is that true?

WHAT'S THE CUTOFF POINT?

Do people really make better choices with more information, or can too much information actually undermine the decision-making process?

Among economists, it is an axiom that choice is good and more choice is better. Giving buyers more choice means more -- and more intense -- competition, which lowers prices, raises quality and fosters innovation. In the end, workers are more productive, consumers are better off and the economy is bigger and more efficient. It's a lovely theory. ... Unfortunately, it turns out not to be true. Yes, up to a point, choice does enhance efficiency and consumer welfare. But at some point, there get to be so many options about what to buy or what career to go into or which mutual fund to invest in that many people make worse decisions than they would if they had fewer choices...
--Washington Post, September 10, 2004

We can only process a finite amount of information at any time. Once exceeded, information overload occurs. Studies have shown that as a decision-maker is initially given information, decision quality improves, but once the information level reaches saturation point, the decision-making quality begins to deteriorate. Thus, at some point, we become overloaded with information, and our decision-making abilities erode.
 

  ...Continued in the April issue of Technical Analysis of STOCKS & COMMODITIES

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Excerpted from an article originally published in the April 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine.
All rights reserved. © Copyright 2005, Technical Analysis, Inc.

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