Jun 10
15
Bad Data Leads To Bad Strategy
During the weekend one of my oldest friends, PJ, came to visit with his daughter. Suffice to say that he takes credit for introducing me to my wife, and we have been married for almost 30 years, so that has to take the friendship back a long way!
PJ is out from the UK for a few weeks visiting his daughter and looking at possible investments. His daughter is seriously bright (she got a masters in economics at one of the top universities in the UK) and about a year ago started her first company, which has been funded, and appears to have people knocking down the doors to invest in, and is cash flow positive. So it appears that she is on her way…
Over the weekend she was talking to me a bit about what happened in between, which I found really interesting.
When she got her masters she applied for a job in the UK government and was accepted. It was one of those jobs that a young academic with really great credentials would do anything to get. A job in the Home Office in the UK developing the economic rationale that leads to macro policy decisions. That is the kind of thing that gives you the chops to pick which major investment bank you want to go into after four or five years, and then you get on the escalator to the top…
But it didn't work out that way for her, apparently.
What happened was that she found herself in a job where instead of looking at a sector where the data was just waiting to be crunched in order for policy recommendations to be developed, she found herself in a job where the ministers would develop policy and then look for the economists to provide the selective data that would enable the justification of the policy – sophistry at its worst!
So after eight months of realizing that the world no longer operated with any kind of integrity and that she was not going to be able to change it, she quit and got into media. And hasn't looked back since. She will do well…
Isn't it interesting how things work nowadays?
The kind of selective data filtering that she experienced may not have started with the British public service and how it provides economic rationale and certainly it won't end there. This kind of activism in pursuit of a specific agenda is the fundamental reason that industry groups are in fact formed.
This is creating a massive problem.
If policy is created based on a subjective agenda to support a political position, or a business model, or some other rationale that attempts to guide reality rather than to be informed by reality, what happens is a crash.
It may be the collapse of a building that was constructed using inferior materials. It may be the failure of your dishwasher that, even notwithstanding the fact that it is a quality brand, used a motor that in turn used a chip that was built to the minimum specifications. But equally it could be that the child that is fed the milk formula that came from a factory in China that used melamine to bulk up the protein content – and consequently dies. It could be the analysis of downloading and P2P that tries to criminalize the person who shares a song or a movie online.
When any strategic decision is based on incorrect data, it is inevitable that the actions resulting will lead to massive problems.
Stopping – and then reversing – a trend of the magnitude of the wave that we are all surfing is going to be a big challenge. Ironically almost everyone that I talk to who has been in business sees the same trend becoming more and more obvious to them – the epitome of “Greed Is Good” thinking…
It isn't. Business is good. Not greed.