we all know the importance of information but first it is essential to get the right information. In this post I will give an introduction into the processes of getting valuable information. Hares and Royle 1994 state: “Whatever technique is used to value an investment the vital first step is to collect the right information. This entails knowing: what information to include and, just as important, what not to include; whether the information is accurate. This reveals to necessity of knowing what to do and what information is actually needed. Spending money and time on unrelated information is a waste and serves of benefit to nobody.
According to Hares and Royle there are three points to gathering information which if done correctly will result in high quality information collected and will save time and money as irrelevant information will not be gathered. These 3 points are:
1. Identifying the costs and benefits that matter. The idea is that you will avoid wasting time on data that is of no relevance or use to you. What needs to be asked is what information do I actually need to gather?
2. Evaluating those costs and benefits which are relevant to the investment decision. These costs and benefits however can be hard to predict. There are useful ways of predicting them though.
3. Monitoring the costs and benefits continuously. It is important that you pay attention to the costs and benefits of the information as they may change or new knowledge may come to light- check whether or not the information collected and decisions made were definitely the right ones.
In my next post I will elaborate on this topic further.
Reference: Hares & Royle, 1994. Measuring the Value of Information Technology.