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People expect financial professionals to take rational decisions. See also my previous posts on good decisions versus good outcomes. And most people interpret rational decisions as decisions where there is some sort of transparent cause-and-effect relationship. And nowadays in most cases that means relying on data that has been processed by computers. It is relatively easy and safe to stand behind these data results. But do you trust the data?

Let me start by saying that I do believe in the value of big data. But I also trust my intuition. It is impossible, and it would also not be good, to turn off your intuition. When your intuition is aligned with what the data tells you then it is an easy call. It becomes tricky when there is a disparity between your intuition and what the data tells you. Then you must show your cards. Do you trust your intuition? Or do you follow the data?

Every person knows the scam advertisements. Everything seems to make sense, but you know it is not right. In the financial world I often hear the phrase Numbers do not lie. I am not so sure about that. Many major financial scandals were about inflated numbers. In other words, the numbers were exaggerated and therefore did not represent the reality based on the rules that were in place at that time. Numbers do not lie … hhhmmm.

But let’s keep it simple. Do you trust Google Maps for driving directions? Most likely the answer is yes when you go to a new destination as you do know how to get there yourself. But how about if you go to an important appointment tomorrow and you want to know what time to leave? Do you rely solely on Google Maps? My guess is maybe not. Most likely you will add some extra driving time. But that does not mean that the data is not good. You just do not want to arrive late.

My guess is that if you do not know how, the parameters used, the estimated time has been calculated you will not 100% trust it. Certain parameters seem obvious like distance, modality, time of the day, day of the week, etc. But how about factors like incidental road works, weather forecast, strikes, refueling etc.? Still Google Maps will show you a time that is a good guidance.

But how about public transport whereby you change modalities a few times. Do you trust Google Maps? I would say it depends. For driving a car, the estimated time is based on big empiric data over a relative long period. Relatively reliable. For public transport the journey time is based on a schedule. But will drivers follow the schedule? That will depend on the country. Your intuition will tell you that you can rely on the schedule in Sweden but maybe not so much in Greece.

On a personal note. At the time that I was financial director I was involved in a divestment project. I was asked to have a look at the financial number prepared by group control. They hold the financial ‘truth’. Or so we thought. The financial numbers were the basis for price setting, so they were important. But when I reviewed the numbers quickly, I did not have a good feeling. Knowing the business, my gut feeling told me that the numbers did not correspond with reality. Even though I could not pinpoint directly where the problem was. In the end my intuition was correct and the numbers were wrong.

Nowadays my intuition trumps data. It is not easy to tell your colleagues/superiors that the data is wrong. But it would be even worse if we had proceeded the divestment and sharing the wrong numbers with the third party.

Next post I will deliberate on how intuition will come with time and experience. And how you can speed up that process.

Post Author: Frank van Vliet

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