Friday, May 14th, 2010
the cave and the flow

These days, it is not hard to be pulled into the flow of information.  Digital devices bring it to wherever we may be, at all hours of the day or night.  The flow is a raging river that sweeps us along.

The question is whether or when or how often to seek higher ground and retreat to a cave of our own.

As someone whose mission is to create original ideas, I know that I will do my best work when I spend a lot of time in the cave.  But I must also heed the lessons of the river, so I need to gaze down upon it to gauge its features, to approach it close enough to hear the roars of the raging waters, to reach down into it for a handful of water to taste, and sometimes to take a dip in an eddy of information.  And yes, occasionally I need to swim out into the main current, hoping that it doesn’t sweep me into raging rapids of confusion or over a waterfall of wasted time.

For those that make investment decisions, on their own or within organizations, navigating the information flow in a productive manner is a never-ending challenge.  If you are an individual investor, your own interests and inclinations tend to drive your information strategy, especially your need or wish to be a part of the crowd or to stand outside of it.  There is no right answer on how to cast your information net, but the gathering process had better fit well with the investment strategy that you have adopted.  For example, the information sources and daily routines of technical traders and deep value buyers should have almost nothing in common — they are trying to do different things.

So too an investment organization.  Its strategy should dictate how resources are aligned and how information is sourced and processed.  Everyone from the receptionist to the chief investment officer has gadgets streaming a 24/7 mix of the personal and the professional, the important and the mundane, the signals and the noise.  Trying to monitor and control it in a comprehensive and disciplined way would be unproductive, counterproductive, and just plain futile, although whoever is in charge can set the tone and remind everyone that very few of the big leaps forward come from the torrent of bits and bites that we have difficulty swimming away from.

And the question must always be asked:  “Who is spending time in the cave?”

It is not banishment to be assigned to the cave, but freedom.  The freedom to be apart, to take the time to examine ideas in detail and follow them wherever they lead, to explore the nooks and crannies of the possibilities.  There, it is easier to sort the facts from the opinions, the reality from the sheen, and the essence from the superfluous.

All of this can be taken to extremes, of course, and a trip to the cave could turn you into a hermit, out of touch with the world in which your insights should be applied.  A brilliant idea scribbled on a piece of paper once a decade and handed to an outsider could be valuable in a sense (some pundits have gained fame and fortune with the equivalent of it), but it’s the rare organization that would have the patience required to fund that kind of talent.

Instead, the goal for someone leading an investment organization should be to look at the mix of roles and to see where it would pay to add a cave dweller, or at least someone who goes there occasionally.  Despite the vast changes in the nature of information flows and the structure of investment markets, many jobs are defined in more or less the same terms as they were decades ago.  Those titles and job descriptions previously applied to a world in which the interactions and temptations were much different than they are today.  A forward-thinking organization should recognize that and begin to reconstruct who does what and how.

We have enough people frolicking in the river.