"There's something deeply ironic about how we've come to privilege quantitative analysis in investing. We take these rich, complex human organisations and reduce them to numbers, then act surprised when our models fail to predict their behaviour. It's like trying to understand a novel by counting how many times each letter appears."
Wasn't it Ronald Coase who said, "torture the numbers long enough, and they'll tell you anything you want to hear"?
Qualitative is far more important that backward looking quantitative analysis
Thanks Silba, very intriguing. I am immediately reminded of Prof Damodaran's 'narrative and numbers'. It focuses more on linking story elements to specific metrics driving valuation (and vice versa), but I believe it is making a similar point. Narratives are important to understand, communicate, and evaluate investment theses.
I love his talks. He's a great story-teller, on top of understanding very well the mechanics and science of valuation. And that's why he can transmit it to other people so well.
Perfect combination for a professor. I bet his lectures have high attendance.
I agree, numbers need a story format. It's difficult to hit the right tone and wording to get the exact "truth" of the numbers, and to some degree it's always up to interpretation. But narrative is equally important, even if more elusive.
Thanks for this Silba, I'm so glad my post inspired you to write this
Love this:
"There's something deeply ironic about how we've come to privilege quantitative analysis in investing. We take these rich, complex human organisations and reduce them to numbers, then act surprised when our models fail to predict their behaviour. It's like trying to understand a novel by counting how many times each letter appears."
Wasn't it Ronald Coase who said, "torture the numbers long enough, and they'll tell you anything you want to hear"?
Qualitative is far more important that backward looking quantitative analysis
Thanks Silba, very intriguing. I am immediately reminded of Prof Damodaran's 'narrative and numbers'. It focuses more on linking story elements to specific metrics driving valuation (and vice versa), but I believe it is making a similar point. Narratives are important to understand, communicate, and evaluate investment theses.
You're very welcome.
He was definitely one of my inspirations.
I love his talks. He's a great story-teller, on top of understanding very well the mechanics and science of valuation. And that's why he can transmit it to other people so well.
Perfect combination for a professor. I bet his lectures have high attendance.
I agree, numbers need a story format. It's difficult to hit the right tone and wording to get the exact "truth" of the numbers, and to some degree it's always up to interpretation. But narrative is equally important, even if more elusive.
I will definitely keep an eye on these items while working on a new deep dive.