One Plus One is Three — Beliefs and Babbling in Business and Investing

Nobody knows anything

An unusual Facebook post made its way to my newsfeed this week. The original post, dating back to 2019, asked users to solve a simple math question: 50 + 50 – 25 * 0 + 2 + 2 = ?. Since then, the post has generated more than 20,000 likes and 100,000+ in comments!

What’s shocking was the level of disagreement as to the correct answer. Numbers varied from 104, 4, 79, …, to 300. Understandably, not every Facebook user will remember their order of operations.

Even more scary to me was how confident everybody was in their answer, whether right or wrong. Perhaps, this is one example of the Dunning-Kruger effect in play. We’re quick to assume that our knowledge and beliefs are correct.

You can see this in the way some Facebook users rationalise their answers. When disagreements arose, some argued that they used “practical math”, not “academic math”. Others blamed inconsistencies on their school curriculum. They suggest that schools today teach “new math”, while schools of the past taught “old math”. Unsurprisingly, some discussions degenerated into arguments and name calling, as is often the case with social media.

Indeed, all of this sounds silly. And it sounds silly because there is a definitive and knowable answer to the question. It’s grounded in globally agreed conventions to arithmetic. To those in the know, any other answer must seem absurd. (There are, however, some actual ambiguous cases according to a Harvard mathematician.)

Is business any different?

It’s tempting to laugh when reading through the comments above on social media. Yet a similar problem, I believe, permeates through the world of business and investing. Management, employees and investors spend many hours in ongoing, sometimes circular, debate and deliberation.

But there’s an important difference here to that of the problem above. In many cases, people cannot know whether they’re truly right or wrong. For some problems, correctness is unknowable or unrealisable without the benefit of time. And unlike scientific hypotheses, business arguments are often ambiguous and difficult to verify.

Furthermore, where the risk of revelation or the threat of error to any individual’s reputation is low, the propensity for charlatanism and babbling grows. Left unchecked, we arrive at the same situation: everybody believes themselves correct.

It’s partly for this reason that unqualified individuals find themselves in leadership and advisory positions. During consultations, round tables, working groups, and what not, it’s sometimes terribly difficult to distinguish between meaningful insight and unhelpful fluff-pieces. Everything sounds nice in the first instance when a wonderful communicator presents it.

Management consultants, for example, are masters of this craft. In my experience as a former consultant, it took time to separate the truly brilliant thinkers from the smooth talkers. But both groups, in my opinion, received promotions in equal measure. (For full disclosure, I fall into neither camp. I am very mediocre)

Of course, nothing in business is certain. When comparing between alternatives, we have to rely on beliefs, conditional on the evidence we have. In Radical Uncertainty, Mervyn King and John Kay refer to this as a Bayesian dial. As new facts come to light, we ought to adjust our confidence and hypothesis accordingly.

But our Bayesian dials are sensitive to heuristics and emotional cues as well. As Daniel Kahneman observed in Thinking, Fast and Slow, we often substitute hard problems for trivial questions or irrelevant information. And as Mervyn King wrote, we sometimes “invent knowledge we cannot have” to cope with uncertainty and unknowability. This creates even more room for mimickers with no substance to thrive.

The babbling contagion

Where the truth is not obvious, we have to analyse the content of messages with extra vigilance. In a room of confident, babbling heads, who is actually correct? In most cases, I suspect, we don’t really know beyond the beliefs we form on the basis of facts, biases and emotion.

Babbling is contagious, especially when it infiltrates the higher echelons of management. Babblers attract more babblers and encourage non-babblers to partake in the art too.

For example, many years ago as a junior management consultant, a senior partner asked why I was so quiet during a client meeting. I said I didn’t have any meaningful insights or questions to contribute at the time. His response: “It doesn’t matter. Just say something. Anything. It’s more important to have your presence known”.

It’s fair feedback in isolation. Arguably, I should’ve been more knowledgeable and prepared. So, the naïve consultant in me took that advice on board.

But what happens when everybody in the room uses the same strategy? You’ll get a lot of unnecessary talk and filler. Today, when I have nothing meaningful to contribute, I simply admit it and make it known the next steps I’ll take to follow-up.

So, what’s the point of all this? The silliness of the arithmetic debate above is a microcosm of the blind spots in our knowledge, beliefs and reasoning that pervades across society more generally.

As American screenwriter William Goldman once said, “nobody knows anything“. There are things we know that we don’t know. And there are things we don’t know that we don’t know. That’s one recipe for danger. Some humility and open mindedness can go a long way, even for the most trivial of things.