2. Information Changes Everything: It’s Not What You Know, It’s What You Know Before Everyone Else!

This chapter is about information and the power of information. We need to understand the power that comes from having more information, or more accurate or more recent information, than your competitors and knowing how to use it. Our interest here is in what information to obtain and how to use it, not on the underlying technology. Information asymmetry occurs when one party in a relationship, in business, military conflict, or elsewhere, knows more than the other party. When you buy a used car, or accept an invitation to join as the fourth on a blind double date, you can assume that the others know more than you do. Should you buy the car, have it inspected, or just walk away? Dealing with information asymmetry is so important that animals have found mechanisms to deal with it when choosing mates, insurance companies have found ways to deal with it when pricing policies, and we all have developed mechanisms to cope with information asymmetry in our social and professional interactions. This chapter describes the principal mechanisms that have been developed to deal with information asymmetry and the conditions under which to use each to learn about the people you’re dealing with.