The Greek Awakening
Bonnie Murray, Founder & CEO, Raccord Inc.
December 31, 2021
In the eighteenth century, Jonathan Edwards and George Whitefield professed their views with such conviction that the colonists flocked from all over to listen. The Great Awakening was a reaction to the Enlightenment and was believed to be the long term cause of the Revolution. This early political upheaval had dire economic consequences. Drawing some parallels, the world listened intently to the “transitory” promulgation, despite what the data was suggesting to the contrary. We now find ourselves in an inflationary environment not seen since the 80’s. The irony in it all is that a mere tapering, rather than tightening, is a way to save face rather than applying the necessary brakes to the liquidity train. It’s quite a conundrum to consider how inflation will seemingly moderate with the confluence of negative real rates, a fully employed economy and continued monetary support, all the while the world swiftly moving through the greek alphabet (COVID). What’s more, the implication that markets will simply unwind over a decade of easy money in an orderly fashion. As of this writing, the S&P has made 68 new highs this year, the second most in history, only topped by 1995. The real lesson here is if one follows the proverbial breadcrumbs (data), they may find themselves with vastly different outcomes.
During the Enlightenment period, people accepted that a knowledge-based world could only be discovered through the human mind. Early explorers wrote history based on their experiences and early philosophers pondered future progression through a strict framework of human acuity. Throughout history we have explained the world according to our perceptions. This century has ushered in significant innovation and a multitude of resources that take us beyond our own cognitive limitations. We now have a plethora of data, with the assistance of technologies, to improve outcomes by identifying patterns, recognizing relationships and drawing inferences that have long eluded our biased minds. Our everyday lives have become more automated and efficient due in part by the marrying of these collective inputs, both intuition and data. This all sounds futuristic but consider the use of Waze, Uber and Google.
It’s a widely held assumption that firms only reference a small portion of their data to inform their decision making and yet the value lies in the untapped 80%. Assessing these rich data sets can create a competitive edge, gained only by organizations that are cognitively flexible and unbiased in their approach, who can move decisively with the data. The challenge, of course, is getting people to a place where they accept the world has irreversibly changed. Loss aversion, conceptually, is the idea that if one takes something away, it will be replaced with something worse, the preference to avoid losses to acquiring gains. This is one of humans most potent cognitive biases and it’s the reason why companies have difficulty innovating and why cultural change is so slow. It’s undeniable that demand has shifted, consumer behavior evolved and an emerging sense of social responsibility on the part of leaders that appreciates power comes not from hierarchy, but from knowing what is valued and how to deliver it. The next wave of technologies will explore new ways to enhance productivity in a newly dispersed work environment and new tools to measure and improve our outcomes.
