In the last half of the 20th century, the world shifted from the industrial era to the information era. The changing of eras is very subtle. For those of us who lived through the era change, it is not like there was some official government notice or a “Welcome to the information era” party that occurred to usher in the new era. It just slowly happened – like a “boil the frog” parable - as innovation accelerates and our cultures adapt. Era changeovers are very backward-looking. It is more like a historian observing that so much had changed that they decided to call the late 20th century as when the information era started.
This big change requires people to rethink their relationship with data, beliefs, and decision-making. Prior to the information age, data was scarce. Our mindset evolved to best handle data scarcity over many millennia. In just the last few decades, the information age required us to flip our mindset 180 degrees. Today, the data abundance mindset is necessary for success. Our genome WILL catch up some day…. Perhaps in 1,000 or more years. Until then, we need to train our brains to handle data abundance. The objective of this article is to introduce the data scarcity world to the data abundance world transition challenge. Cognitive gaps, such as that created by the difference between data scarcity and data abundance, have only accelerated during the information era.
About the author: Jeff Hulett is a career banker, data scientist, behavioral economist, and choice architect. Jeff has held banking and consulting leadership roles at Wells Fargo, Citibank, KPMG, and IBM. Today, Jeff is an executive with the Definitive Companies. He teaches personal finance at James Madison University and provides personal finance seminars. Check out his new book -- Making Choices, Making Money: Your Guide to Making Confident Financial Decisions -- at jeffhulett.com.
In the industrial era, computing power was needed and not yet as available. As a result, math education taught people to do the work of computers. In many ways, people were the gap fillers for furnishing society's increasing computational needs. Our education system trained people to provide the needed computational power before powerful computers and incredible data bandwidth became available.
Over time, digital data storage has been increasing. However, even during the industrial era, those data stores still took effort to locate. Data was often only available to those with a need to know or those willing to provide payment for access. The average person during the industrial era did not regularly interact with data outside that observed in their local, analog life.
The information era is different. Today, powerful computers exist and computing power is both ubiquitous and inexpensive. Digital data stores are no longer like islands with vast oceans around them for protection. Data stores are now among easy-to-access cloud networks. Also, many consumers are willing to trade personal data for some financial gain or entertainment. While this attitude is subject to change, this trade seems to be working for both the consumers and those companies providing the incentives. Data abundance is the defining characteristic of today's information era. Success comes from understanding your essential data and leveraging that data with available computing technology.
The big change – From data scarcity to data abundance
Data scarcity was when the most challenging part of a decision was collecting data. The data was difficult to track down. It was like people were data foragers, where they filled a basket with a few pieces of difficult-to-obtain data they needed for a decision. Since there was not much data, it was relatively easy to weigh and decide once the data was located.
Data abundance has changed our relationship with data 180 degrees in just the last few decades. Consider your smartphone. It is like the end of a data firehose. Once the smartphone is opened, potentially millions of pieces of data come spewing out. Plus, it is not just smartphones, data is everywhere.
The challenge is no longer foraging for data. Our neurobiology, as tuned by evolution, is still calibrated to the data scarcity world. It is like no one told our brains that how we make decisions is dramatically different today. The challenge is now being clear about which of the overwhelming flood of data is actually needed. The challenge is now to curate data, subtract the unneeded data, and use the best decision process. Unfortunately, the education curriculum often teaches students as if we are still in the data scarcity world.
Economics teaches us that which is scarce is that which creates value. So, since data is abundant, then what is that creates value? In the information era, it is scarce human attention that creates value for companies trading in data abundance.
Go West Young Man – a data scarcity and big change to data abundance case study
In the Early 1800s, the United States was quickly expanding. Thomas Jefferson more than doubled the size of the U.S. when he made the Louisiana Purchase from the French. The challenge then was, “How do we settle the West?” In the mid-1800s, the U.S. encouraged people to go west. The Homestead Act provided incredible incentives for people to settle the West. Passed on May 20, 1862, the Homestead Act accelerated the settlement of the western territory by granting adult heads of families 160 acres of surveyed public land for a minimal filing fee and five years of continuous residence on that land.
Think of an information-scarce decision made in the mid-1800s:
“Should I get on this Conestoga wagon and head west where land is free and the soil is fertile?"
-- Alternatively --
"Should I stay in Boston and potentially starve?"
Then, the operative question becomes: "Where do I find the information to help me decide?” Before the information era, that information was very difficult to come by. In fact, other than finding a wagon, getting a handbill about the Homestead Act, and understanding their current prospects, many people had little information about going west. So they did. While finding a few bits of information was challenging, the decision itself was straightforward. “Go West, Young (hu)man” made sense for many.
Imagine that same question today. A program like the Homestead Act would be all over social media. There would be many alternatives to traveling, whether by car, train, or airplane. There could be 100s of different travel options. Also, many "homestead platforms," funded by a flood of Venture Capital, would be stood up to vie for your data attention. Naturally, each company would take a cut of the value of the homesteaders' attention.
The potential homesteaders would have many jobs and their local community to consider as opportunity costs to picking up and leaving. Plus, ALL the land itself could be evaluated by Google Earth. Then, understanding their benefits and incentives to trade whatever they are doing today for the risks associated with the land program would be significant. Each person would have many tradeoffs. Individual tradeoffs would interact with the benefit of all other people considering the program. With the "help" of homestead platforms, the data would not be difficult to come by. However, the curation and evaluation of the incredible volume of data would be significant. In the data-abundance world, those with the best decision process will make the best decisions. Those without a robust decision process will decide based on the incentives of the platform companies.
Solving the data scarcity to data abundance challenge
The technology to solve the decision-making crisis exists today. Behavioral economists describe choice architecture as a critical part of the answer. Choice architecture fills the decision gap created by our brain’s abilities and our cultural decision-making expectations. Choice architecture is how our data scarcity-tuned brains can handle the data abundance reality. Choice architecture enhances individual free will by strengthening our decision process. Choice architecture does not make the decision for you – it provides the proper decision environment enabling YOUR best decision. Good choice architecture has three primary benefits called Decision A-C-T:
Acceleration-enabling faster, lower-cost decisions. It enables a nimble decision environment.
Confidence-inspiring process causes people to be more confident with individual or organizational decisions, increasing buy-in, and decision uptake.
Transparency-providing reporting, documentation, and artifacts to help communicate the decision. Good especially for “second-guessers” like family, boards, or regulators.
Choice Architecture solutions
The following are resources providing for optimal decisions using tools that enable you to achieve conviction in your confidence! These are solutions to develop your own choice architecture. They are high-value and easy to use. For most decisions, they are well worth the time and expense to ensure the best decision and confidence validation. Solutions are provided for individual decision-making, enterprise-level group decision-making, and everyone in between. They all share the core capabilities enabling people’s confidence and the best decisions.
Definitive Choice: For individual or small organization groups - This smartphone app provides a convenient way to enter and weigh your preference criteria, then, enter your potential decision alternatives and their costs. Behind the scenes, it uses decision science to apply your tailored preferences and preference weights to score each of your alternatives. Ultimately, it renders a rank-ordered report to help you understand which alternatives will give you the biggest bang for your buck. Using a decision support app will 1) save you time, 2) optimize your economic value achieved, and 3) increase your decision-making confidence!
Definitive Pro: For corporate and larger organizations - This is an enterprise-level, cloud-based group decision-making platform. Confidence is certainly important in corporate or other professional environments. Most major decisions are done in teams. Group dynamics play a critical role in driving confidence-enabled outcomes for those making the decisions and those responsible for implementing the decisions. Definitive Pro provides a well-structured and configurable choice architecture. This includes integrating and weighing key criteria, overlaying judgment, integrating objective business case and risk information, then providing a means to prioritize and optimize decision recommendations. There are virtually an endless number of uses, just like there are almost an endless number of important decisions. The most popular use cases include M&A, Supplier Risk Management, Technology and strategy portfolio management, and Capital planning.