“Objectivity is the delusion that observations could be made without an observer.”
- Heinz von Foerster (1911 – 2002), Austrian-American scientist, physicist and philosopher
There are two things I’m really grinding on this week.
One is the art and science of forecasting a business. The other was referenced in Monday’s post on the ugliness in the world of professional golf.
In the case of the latter, it occurred to me that if someone could simply do an objective economic analysis of the PGA vs. LIV Tours matter, we might be able to remove the emotion that is ruling the narrative and perhaps move away from the personal attacks that have become prevalent within that narrative.
In the case of the former, and this has been the $64 question for as long as there have been revenue teams, it seems that if we could simply do an objective economic analysis of the business, it’d be easy to forecast it precisely.
In both cases, there are three problems with objective economic analyses.
The first is the “objective” part, as call out by our old friend Heinz, above. There are literally dozens of biases that we could dive into, but I like the way he baked it down; “…the delusion that observations could be made without an observer.” When there is a human element, there will be human tendencies and biases in play. Humans use words like “always,” and “never.” They think in terms of “we do (or don’t) do it that way…” As a football buff, I can cite statistics that tell you Aaron Rodgers is the greatest quarterback of all time. And, almost every football buff who’s not predisposed to my perspective can cite statistic to support a half-dozen other QB’s as the GOAT.
The second is the “economic” part. It’s rarely, if ever, as simple as “just math.” In the past 28 months, we’ve seen a new set of “unprecedented” economic events that have led to dramatic shifts in almost every business.
Here’s another real-life example: In early 2008, I presented a “perfect” forecast (or so I thought), and was asked by our CEO “what could make this forecast go bad, Heston?” “That’s easy,” I replied, “the only thing that blows this number is if the Client exits the North American market completely, and there’s no indication whatsoever they’re considering that. In fact, they’ve made public statements and disclosures indicating the opposite is true.”
That was on a Thursday at 11 AM. The forecast was committed to The Street on Saturday. My Client exited the North American market (completely) on Sunday night. Gulp!
The third problem ties closely to the first one — it’s the analysis part. If an observer influences an observation, so then, does an analyst influence an analysis.
The good news is, that this is why machines will never fully replace people. The bad news is, that it’s the gap that CFO’s, investors and well-intentioned leaders will always try to fill.
So, what do we do? As business people, as golf fans, as human observers of and participants in life?
- Ask better questions. Curiosity tends to produce better conversations.
- Listen more deeply to the answers. Empathy and understanding work dang near every time.
- Avoid absolutes. “Always” and “never” are rarely really in play!
- Think in terms of ranges. Not averages, but best, worst, and likely case ranges.
- Constantly seek the “why?” If we understand the “Why’s” we’ll never be too far off of the whats.
Leave a Reply