It was one of those eye-opening moments.
I’d gone to business school after a decade in journalism-laced-with-consulting out of Mexico City. My (meager) income doubled when I jumped from regular journalism to business writing, from United Press International (UPI) to Business International and McGraw-Hill World News. So when David Kreps asked the question “what’s the value of business information,” I raised my hand. I said:
I’m not sure, but it’s a lot. Information is worth a ton of money. Big companies paid my last employer thousands of dollars for economic projections, inflation and currency updates, and so on.
Prof. Kreps said no, that was way off. Here’s the answer:
Information in business is worth the difference between the business’ bank account balance. Take the cash in the bank with the information, and subtract from that what it would have been without the information, and that’s the value.
Sure, that’s a bit hypothetical. But it’s also stark reality. It was hard for me to absorb, because I tend to like touchy-feely vague definitions and case-by-case answers; also, this cold hard money definition felt like a reduction. But there it is.
Why scary? Ask yourself: how much time, trouble, and money do I spend on information I don’t use? How much do I research beyond what I need to make a decision?
[…] Berry provides a simple, but profound, formula of value in his blog post from last Thursday. Professor Kreps was simply telling Tim that the value of information lies in how it will […]
I work more in the matters of technology security. Today the protection of Data is one of the most concern issues, I agree with you and Dr. Kreps, because in order to protect information, we must know the value of it. All big companies, need to understand what information is really valuable in order to protect it from leaks that will result into money loss, it is some times a hard task, bue I think we really can´t protect every bit of information, and also, the techonolgy applied in protecting this information will have a cost, that shouldn’t be higher than the value of informatio we want to protect.
I would have liked Prof. Kreps. As one executive of my current company once said, “If data were dirt and information were water, we would be buried alive and dying of thirst.” Prof. Kreps’ formula demonstrates the true value of information and how we must continue to seek information and not just more data.
I do not agree with you or Prof Kreps. That is in-the-box thinking. Out of the box thinking means using information that does not seem relevant but can be made to apply. I lean a lot about things by seeing it applied or misapplied in other circumstances and then adapting or seeing an analogy to my circumstances. Things that seemed totally irrelevant 20 years ago have come in handy to have known later. Endless curiosity has its uses.
Thanks Kate, and I’d say you and me and Prof. Kreps would all agree with the point you make here. Establishing a conceptual business value measuring stick doesn’t argue against curiosity, does it? And endless curiosity, while it may have less than endless business value, is a very attractive proposition. There’s life too, aside from business, right? I don’t want to limit curiosity, just overabundance of boring expensive hard-to-apply market research and analysis. Tim.
Without even trying to decipher the meaning of Professor Kreps statement, your past experience in ‘journalism-laced-with-consulting out of Mexico City’ sparked my interest. I am presently teaching business subjects in two Catholic universities in Mexico City, after more than 35 years of business experience, from IBM salesman to General Manager in Duracell and Moulinex, all in Mexico. Maybe our paths crossed during your stay in the Mexico City scene, and would love to swap war stories. Been following your blog for almost a year, and have quoted you in some of my classes. Keep up the good work! Un abrazo, Carlos
Thanks Carlos. You’re making me wish I get down to Mexico more these days, but generally it’s been for holidays once every couple of years. I was in Veracruz to do a talk for the AMCDPE a couple of years ago, but that’s hard for me because of scheduling problems. My “journalism-laced-with-consulting” was a combination of straight journalism for McGraw-Hill World News (publishes Business Week and others) and business research and consulting for Business International. I’m guessing that you’re with Universidad Panamericana, right? I’d love to take you up on that swapping stories idea.
Too bad about Mexico these days. It used to be a great place to live; even, believe it or not, Mexico City. And a lot safer than any city in the U.S. Times have sure changed.
I would agree with Prof. Kreps in principle. However – I would also point out that the world of academics has the luxury of being hypothetical and idealistic while most businesses do not.
For most of the business world, taking time to categorize and distill every bit of information down to a cash value is simply not going to be practical. The exercise of thinking about the value of information however is well worth the effort. The value is in the process. Reflection on this concept should teach us to think critically about eliminating waste which is a necessity and a major benefit to any business. Could it be the good professors goal was not to provide “the right answer” but even better – a provocation to prove him wrong?
Don F Perkins
Don, I think you’d agree with Prof. Kreps even more than you realize, because he was very much making the point that one shouldn’t bother to categorize and distill every bit of information; that a lot of the information worship we engage in is not really helping the business. He was, as you suggest, putting a message between the lines. Tim.