A clever experiment was conducted by psychologists. There was a queue at a photocopiers shop. The psychologists tried to get a person jump the line on the following three excuses.
1. "Excuse me , I have three pages. May I use the Xerox machines?" ( The no information case)
2. "Excuse me, I have three pages. May I use the Xerox machine, because I have to make copies?" (Irrelevant or useless information: everyone in the line needs to make copies or they wouldn’t be in the line)
3. "Excuse me, I have three pages. May I use the Xerox machine, because I am in a rush?"
A surprisingly high 60% of the people allowed the person to jump the line even without any information given as in 1 above. However when irrelevant or real information was given the rate jumped to 90%. By simply using the word "because" in a sentence the person was able to persuade people to believe that the justification was true and meaningful. We like reasons however banal they may be.
Can such irrelevant, useless and redundant information really impact anyone’s behavior? Yes it does and we fall prey to such information in our daily lives.
On any given day and any time you turn on the TV and you find that that there are stock market and business channels dedicated to filling your mind with in-depth analysis of what are near random fluctuations in the market. These are explained to us by a combination of attractive women and men in the company of experts to add credibility. The same thing happens in the business print media which is filled by ex-post justifications for why the market did whatever it did yesterday.
We are aware that too much information leads to information overload and makes us feel overconfident which I have discussed in my last issue of “Distinguishing the Signal from the Noise”. But this is not the only problem: we actually find even useless information interesting and we process it. When we see information in a format that we are familiar with we will unquestioningly process it. Hence the noise peddlers survive in the markets. In times of chronic uncertainty, investors will turn to any vague explanation and cling to it.
The current times are filled with uncertainty and investors will do well by not falling prey to the vast amount of useless information and debates of these noise peddlers. Having a clear equanimous mind will help you to take better decisions.
