Information Absorption Inequality

by Reihan Salam

Izabella Kaminska shares informal thoughts on information overload:

Truth is information is power. You can choose to ignore it and get behind, but this is a market like anything else. And you can’t stop or shut it down just because you can’t keep up. Only the strongest and best at absorbing and processing all this information will survive.

This is why bloggers and journalists like us (those using social media rather than those using old techniques) become so insightful. We do the reading so you don’t have to.

But guess what, the amount of material we consume on a daily basis relative to the investment community which still operates on 1990s information terms (a research note here, a pontification there, a look at the newspaper — yesterday’s news, tomorrow ) makes me realise the scale of the power chasm that is forming between the informed, those who know and do exploit the information available, and the uninformed, who don’t because it gets in the way of their quality of life.

The new inequality will be an information absorption inequality.

You can’t switch the information off. You can’t opt out without the trade off being that you will be dumber and less informed and thus probably more rubbish at making investment choices. [Emphasis added]

Brink Lindsey has written an excellent book — Human Capitalism, the extended version of which comes out in May — which carefully argues that “information absorption inequality,” understood more broadly, has been the central driver of the larger transformation of the advanced market economies, and in particular the dispersion of income and wealth across households.

Why are the blessings of American life so unevenly distributed? Because of complexity, I will argue. It is my contention that, although things were very different in the relatively recent past, today the primary determinant of socioeconomic status is the ability to handle the mental demands of a complex social environment. If you can do that, you’ll likely have ample opportunities to find and pursue a career with interesting, challenging, and rewarding work. But if you can’t, you’ll probably be relegated to a marginal role in the great social enterprise— where, among other downsides, you’ll face a dramatically higher risk of falling into dysfunctional and self-destructive patterns of behavior. Complexity has opened a great divide between those who have mastered its requirements and those who haven’t.

Though Lindsey focuses, as he must, on conventional measures of human capital, e.g., college-educated vs. non-college-educated, the truth, as he makes clear, is more granular. And a focus on the aforementioned dispersion of income and wealth masks intangible, harder-to-measure factors, like subjective well-being or, more specifically, feelings of security, stimulation, and satisfaction. The ability to navigate a complex social environment is unevenly distributed, e.g., the ability to use recreational drugs without becoming dependent is unevenly distributed, as some individuals are embedded in supportive environments that encourage responsible consumption and don’t have psychological or (perhaps) physiological proclivities towards addiction while others lead very isolated lives and do bend towards self-destructive behavior, etc. So behavior that can be quite pleasant and rewarding and mind-expanding for some can become a paralyzing nightmare for others. Lindsey’s framework is very useful for understanding the world in which we live. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.