Your Information is Worthless*
Before you panic and delete gigabytes, terabytes, or even petabytes of information on your servers, let us first discuss what makes information valuable. By my definition, the value of information is the amount that one would be willing to pay for information prior to making a decision. That doesn’t necessarily mean that the information has to be purchased in order for it to be valuable.
People search out all kinds of information before making a decision. Ever checked the weather forecast before heading out the door? Checked Consumer Reports before making a significant purchase? Looked up a restaurant on Yelp before making a reservation? Conducted a background check before hiring a nanny or other employee? Purchased a CarFax report before buying a car? These are all examples of information that is valuable prior to making a decision. However, not all information is valuable. There are very specific qualities that make information valuable. When these qualities are lacking, the information is significantly less valuable, even worthless in some cases. So, let’s take a look at each of these qualities:
Having complete information means that you have all the necessary parts or components. There are cases where you can get by without complete information. However, there are cases when you need all the parts in order for it to be valuable information. Ever tried mailing a letter without a zip code? Even with all the other address information provided on the envelope, the letter ended up being returned to the sender. Maybe if you were lucky, someone at the post office was nice enough to add the zip code for you. But even then, it came at a cost of their time and effort. The information that was provided wasn’t complete, and therefore, wasn’t as valuable as it could have been.
Comprehensive information means that it is very inclusive. This most often means that you have all of the information that you need to make a decision. If you are the head of financial investments for an auto manufacturer’s pension fund, you may want to know which funds have the lowest fees. However, this alone will not be enough to make a decision on the best fund. You may also want to know how each fund performed against various benchmarks, as well as the market value of the fund, and number of shares outstanding. You may even want to know what the average fees are across all funds, as well as the average fees paid by other auto manufacturers’ pension funds. Collectively, all of this information allows one to make a comprehensive decision.
Context literally means the text that surrounds a word or statement and gives it meaning. Context has become very relevant in the world of social media. Numerous businesses and tools have popped up recently that attempt to gauge sentiment by scanning Facebook logs and Twitter feeds. This was used heavily by the presidential campaigns in the most recent election. However, without understanding the context, sentiment can be misinterpreted. Consider the following:
- “Rich people should pay more in taxes…”
- “The rich take advantage of tax loopholes…”
- “I cannot stand Rich. He is such a jerk…”
Context is also important with any type of information. Knowing the temperature is sixty degrees isn’t enough to know how people may have been dressed on a certain day. Fahrenheit or Celsius? December 1 or July 1? 12 noon or 12 midnight? Houston, Texas or Anchorage, Alaska? The context will make the information valuable.
Accessible information can be easily obtained or used. Accessibility is impacted by a number of factors. Is there a cost involved in getting the information? Is that cost prohibitive? Is the information confidential, proprietary or password protected? Is the information widely available on the internet or only available at a single physical location? Is there a tool required to access the information, such as a microfilm reader or a specific database driver? Is the information freely available, or will you have to file a Freedom of Information Act request in order for the information to be released? Is the IT department holding the data hostage, throwing up roadblocks, providing little support, and making it exceptionally difficult for the business to leverage its data?
Numerous surveys have been conducted to measure and analyze the factors involved in how quickly businesses can answer specific requests. Companies in the top 20th percentile of accurate and accessible information were able to get to an answer twice as fast as those in the mid-50th percentile, and over six times as fast as those companies in the bottom 30th percentile.
Usability is based on how effectively and efficiently you can achieve your objective(s) using the information. In order for information to be usable, it must be relevant to the audience, tailored for the audience, and at the appropriate level of detail. If one is a vegan, hearing information on the quality of the free range, grass fed meat being served at dinner will be quite useless. If one is shopping for a car seat, information that provides a recommendation based on tests done on a number of different car seats will be significantly more valuable than reviewing a 1,200 page report that provides explicit scientific detail of all the tests performed on each of the car seats. On the other hand, a product specialist at a company that manufactures car seats may find the full report more valuable and usable for their objectives.
Degree of Accuracy
The degree of accuracy is the measure of how correct, accurate, exact, precise, or free of error the information may be. The value of information is, without a doubt, dependent on the accuracy. However, the degree of accuracy required for the information to be valuable is dependent on the use case. The area of a circle is calculated by multiplying Pi by the square of the radius. It is unlikely that calculating the area of a circle by using 4 as the value of Pi will be sufficient. Using 3.14 will probably be precise enough in most cases. However, in some scientific or architectural use cases, it may be required that the precision of Pi is ten digits or more to the right of the decimal (3.1415926535).
When completing an SEC filing, or your federal income tax return, an extremely high degree of accuracy is required (99.99+%). However, when performing an internal analysis, or trying to understand the revenue impact of a 1% increase in income tax rates in Illinois, a slightly lower degree of accuracy will still be acceptable for the information to be valuable (95-99%).
The volume simply measures the amount of information available. If you wanted to assess who was the best team in Major League Baseball during the regular season, would you base your assessment on one game? Twenty games? All 162 games? Greater volumes will help to smooth out anomalies in the information. Even the worst team in Major League Baseball won 55 games this past season, and the best team lost 64 games. Similarly, flipping a coin four times and having heads come up three of the four times does not mean that heads will continue to come up in 75% of the attempts if the coin is flipped another 100,000 times.
The velocity measures how quickly information changes. If you are driving to Texas tomorrow, using a map printed three months ago will probably look very similar to a map printed yesterday. The directional information that will get you to Texas probably hasn’t changed materially over three months. Now, if you decided to purchase a large quantity of shares in Groupon using the stock quote from three months ago, there will be a gross material difference compared to a stock quote from three seconds ago. The velocity of the information will determine the value of the information.
Variety indicates how diversified or varied the information sources may be. Imagine if you only counted on one source for all your information. Then imagine picking up the Chicago Tribune on November 3, 1948 to learn that Thomas Dewey was elected President of the United States. Hopefully, at some point you would have consulted another source to find out that Harry Truman won re-election. Validating the weather forecast by checking WeatherBug, Weather Channel, and the local newspaper provides significantly greater value than checking only the Chicago Tribune.
Ability/Desire to Act
The ability or desire to act is required in order for information to have value. If the information is lacking one or more of the qualities above, which may prohibit one from taking action or making a decision, the information has little value. Further, if one chooses not to act on the information, regardless of the qualities described above, then the information has little value.
It has now been well documented through the 9/11 Commission’s report that in the months and days leading up to the 9/11 terrorist attacks there was credible information that highlighted al Qaeda’s intent to attack, target, method of attack, and approximate timeframe. However, due to a combination of the inability to act and lack of desire to act, this information was worthless in preventing the terrorist attacks.
Think of possessing information as being similar to holding a stock. While you hold a stock, it may increase or decrease in value, but that is considered an unrealized gain or loss until action (sell) is taken. Similarly, holding information may be valuable, but the value is unrealized until action is taken. Having valuable information, but taking no action is similar to purchasing Enron stock in the mid-90’s, continuing to hold it as it peaked, and continuing to hold it as it eventually became worthless in the fallout of its accounting scandal.
The bottom line is that if you don’t act on your information, either because of the condition of the information, or because you choose not to act, it is worthless. That’s not to say that it is forever worthless and will never be valuable. What I can say is that Kenway Consulting can’t and won’t force you to act on your information, but we can help you so that your information is in a state that you can act on it, and therefore realize the value of the information. Kenway Consulting helps our clients get the most value out of their information through our Data Governance, Master Data Management, and Business Intelligence solutions. For more information on these solutions, please contact us at email@example.com.