Thank you! This is exactly what I was looking for. Thinking in terms of bits of information is still not quite intuitive to me, but it seems the right way to go. I've been away from LW for quite a while and I forgot how nice it is to get answers like this to questions.
If it's worth saying, but not worth its own post (even in Discussion), then it goes here.
Notes for future OT posters:
1. Please add the 'open_thread' tag.
2. Check if there is an active Open Thread before posting a new one. (Immediately before; refresh the list-of-threads page before posting.)
3. Open Threads should be posted in Discussion, and not Main.
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