MaSSSoftech

We're swimming in it. Or maybe downing is a better term. Whatever the correct label, the digital supply of financial and economic data, information and analysis is exploding. We can't get enough of it. Or are we getting too much? More to the point, Is it helping?

The question for strategic-minded investors is whether the growing amount of information is enhancing our investment results? This is a critical question, in part because the information revolution has only just begun. As David Leinweber notes in his fascinating new book Nerds on Wall Street: Math, Machines and Wired Markets, "We are just beginning to see the decentralized use of information technology in this industry."

The future, then, is sure to be one of even more financial and economic information. But is more really better when it comes to investing?

Back in the good old days, when your editor was a staff writer at Bloomberg, there was a brief, shining moment when I thought the financial world was my oyster. In the early days of the job, I was awed by the apparent possibilities that arose from sitting in front of a Bloomberg terminal, which was made available to all employees. The array of data, news and analysis at my fingertips was overwhelming, but I was determined to become proficient at leveraging this amazing machine for not only my day job but for my personal investments as well.

As it turned out, access to a Bloomberg terminal isn't a short cut to big profits. Don't misunderstand: It's a great resource, but simply having one doesn't necessarily make you a better investor, although not having one may put you at a disadvantage. But whether it's a Bloomberg terminal or the Internet, technology by itself doesn't automatically elevate returns. One reason is that hundreds of thousands of other people on the planet have access to the same information. Fighting a war with nuclear weapons, so to speak, is a clear advantage if your enemy is using bow and arrow. But if everyone has a large supply of ICBMs, the game is something of a standoff.

Some of the challenge is no doubt tied to my own limitations. Surely there are countless investors who are smarter, and so they're better prepared to make use of the digital revolution. But that's not an entirely satisfying answer. As one example, consider the long-run history of the equity mutual fund business. Looking at the grand sweep of performance for this lot offers precious little evidence that results are improving.