Are you approximately right or precisely wrong?


Experienced salespeople know that being precise helps if you want to convince someone of something.

For example, talking about how a particular product will save you $252,453.21 can result in more head nodding and acceptance among the audience than saying that it will save more than $250k.

That is partly because the precision of the first number implies that there is a model, analysis and intellectual rigour behind it, while the second is one that you can easily appreciate and potentially evaluate from first principles – thinking through its components and key factors.

Why does this matter to you?

In many aspects of business, the decisions you make will depend on your expectations for the future – and you are expected to model these expectations and analyse what they mean for you.

Software tools today are so advanced and capable of so much precision that they can lull you into a false sense of security.

For example, most people can build a detailed Excel model with several inputs, multiple levels of calculation and come up with very precise forecasts and ideas.

Quite often this leads to a situation where if an answer comes out of the model, it is accepted without question. In fact, in some situations, people are willing to discount reality and go with the model.

The same effect, magnified, can be seen with data analysis and social mining tools. Yes, you can do some very fancy sentiment analysis to take the emotional temperature of a cohort of people.

That can be a very persuasive input into a decision process.

And that is the thing we need to guard against because there are at least two things we can be certain of:

  1. The future is uncertain – a number of things could happen.
  2. There will be bugs – your model/forecast/tool will have errors.

The benefit of a model is that it allows you to express in mathematical form an idea and its key drivers. It allows you to explore a problem space.

That is the main purpose of a model – to help you explore and think more clearly about something. Its purpose is not to give you a definitive answer or to be an exact depiction of reality but instead to clarify what could happen and the range in which you are operating.

Expecting to get the answer exactly right is more likely to result in you being wrong much of the time.

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