Question

In: Finance

Consider the four definitions of information presented in this chapter. The problem with the first definition,...

Consider the four definitions of information presented in this chapter. The problem with the first definition, “knowledge derived from data,” is that it merely substitutes one word we don’t know the meaning of (information) for a second word we don’t know the meaning of (knowledge). The problem with the second definition, “data presented in a meaningful context,” is that it is too subjective. Whose context? What makes a context meaningful? The third definition, “data processed by summing, ordering, averaging, etc.,” is too mechanical. It tells us what to do, but it doesn’t tell us what information is. The fourth definition, “a difference that makes a difference,” is vague and unhelpful.

Also, none of these definitions helps us to quantify the amount of information we receive. What is the information content of the statement that every human being has a navel? Zero—you already know that. In contrast, the statement that someone has just deposited $50,000 into your checking account is chock-full of information. So, good information has an element of surprise.

Considering all of these points, answer the following questions:

a. What is information made of?

b. If you have more information, do you weigh more? Why or why not?

c. When you give a copy of your transcript to a prospective employer, how is information produced? What part of that information production process do you control? What, if anything, can you do to improve the quality of information that the employer conceives?

d. Give your own best definition of information.

e. Explain how you think it is possible that we have an industry called the information technology industry, but we have great difficulty defining the word information.

Solutions

Expert Solution

a. What is information made of?

Information is made of data that has been processed in some way to be meaningful to the recipient.

b. If you have more information, do you weigh more? Why or why not?

If you are carrying around a 1,000-page report that contains information, then you might say information causes you to physically weigh more. In most situations, however, having more information does not result in a weight gain. It results in a change in your brain.

c. When you give a copy of your transcript to a prospective employer, how is information produced? What part of that information production process do you control? What, if anything, can you do to improve the quality of information that the employer conceives?

A transcript from a prospective employee is meaningful to an employer trying to fill a position. The content of the transcript (courses taken, grades earned) has value in the hiring context. A dog has no use for the content of the transcript and so it has no value to him. If the piece of paper the transcript is printed on is crumpled up, then it might have value to the dog as an item to chase or tear up (depending on the dog).

d. Give your own best definition of information.

Student answers will vary. Despite its subjectivity, I still like “information is data that is meaningful within a context.” Also, look for the fact that data usually must be transformed in some way to be meaningful; and to provide value, the information must make a difference to the recipient.

e. Explain how you think it is possible that we have an industry called the information technology industry, but we have great difficulty defining the word information.

We have many everyday terms that are difficult to define. We speak of the health care industry, but we typically only define “health” in the negative (the absence of disease). This is just another example of a term that is broadly understood but difficult to define precisely.


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