Sunday, January 14th, 2018
analysis itself

In an earlier dispatchthe research puzzle | It was called “searching for quality.” in this series of postings inspired by Robert Pirsig’s Zen and the Art of Motorcycle Maintenance (ZMM), I wrote about his quest for Quality (with a capital Q) being the main focus of the book.  But at one point he wrote, “The subject for analysis, the patient on the table, was no longer Quality, but analysis itself.”

You might say that this blog, soon to be ten years old, is also concerned with analysis itself.  Whether dealing with investment decision making or industry practice or the workings of organizations, its focus has been about the “how” (rather than the “what,” which is the normal fare for most financial industry commentary).  I found that ZMM gave me much to ponder in that regard.

In this penultimate posting of the series, I’d like to emphasize a few of the ideas from the book that relate to the analytical process.

Some of them I have touched upon already, such as the importance of understanding the categories that populate our investing framework and our reliance upon them.  Pirsig wrote, “You’d think the process of subdivision and classification would come to an end somewhere, but it doesn’t.  It just goes on and on.”  We are tied to frameworks, those of the “market,” of our organizations, and of our own.  The bindings are powerful; “the piles and the basis for sorting and interrelating them” can dictate our actions and reactions; we are “predisposed to see” some things and not others.

How methodical is our approach?  A reminder from Pirsig:  “The real purpose of scientific method is to make sure Nature hasn’t misled you into thinking you know something you don’t actually know.”  We could substitute “Mr. Market” for “Nature” as a reminder that the problem is endemic for investment professionals, but, as mentioned previously, the scientific method is ill-suited to definitive answers, since time and markets keep marching on.

Something as simple as a decision journalFarnam Street | Here’s an example of one from Shane Parrish. can have a big impact on behaviors and outcomes, yet it’s pretty uncommon among investment decision makers to use one.  Pirsig, regarding his lab journals:  “Everything gets written down, formally, so that you know at all times where you are, where you’ve been, where you’re going and where you want to get.”  Each of those locations/destinations are easy to lose sight of, even though we believe our powers of recollection to be foolproof.

In a time of “alternative facts,” we need to be careful about the evidence that we rely upon and broadcast ourselves.  Pirsig invokes Henri Poincaré’s “hierarchy of facts.”  For starters, “The more general a fact, the more precious it is.”  And the simple ones are the ones most likely to reappear (even though we seem to opt for complexity most of the time).  But today’s truth can replace yesterday’s, and a new fact can be discovered.  Processing ideas and placing them into categories is rather important (if unheralded) work.  (And, it should go without saying, falsehoods and deceptive tactics are the tools of those who would impede discovery and awareness.  Banish them.)

Other thoughts/quotes to consider:

~ Close can be good enough if you’re doing the right things.  Your organization will not be perfectly tuned; even a motorcycle isn’t.  “Precision instruments are designed to achieve an idea, dimensional precision, whose perfection is impossible.  There is no perfectly shaped part of the motorcycle and never will be, but when you come as close as these instruments take you, remarkable things happen, and you go flying across the countryside under a power that would be called magic if it were not so completely rational in every way.”

~ I think the relationship of structure to process in analyzing organizations is important, that structure drives process more than most think.  Therefore, organizations should be very concerned with structural elements that are often overlooked (and those doing due diligence should be digging to identify them).  Too often, unnecessary and even counterproductive activities are performed because “the structure demands that it be that way.”

~ While ZMM deals with hierarchies of concepts, constructs, and human arrangements, you can see in retrospect how network theory has eroded some of those over the last forty years — and get the feeling that there is even more to come.

~ Pioneers “are invariably, by their nature, mess-makers.”  You can’t move forward without them and organizations that don’t have any grow stale, but you have to deal with “the crud and debris they leave behind them.”  The analytical process needs to expect and accommodate change and the hassles that come with it.

~ “He felt that institutions such as schools, churches, governments and political organizations of every sort all tended to direct thought for ends other than truth, for the perpetuation of their own functions, and for the control of individuals in the service of these functions.”  It can happen in any organization.  Even yours.  Be on the lookout.

Reading ZMM is like peeling the proverbial onion.  And it’s a reminder of the need to look in different ways at what we do and to try to understand the real analytical system that we have formed.

This is the fifth posting about ZMM and the investment world.the research puzzle | It begins here.  It concludes with “a cycle called yourself.”the research puzzle | Among many other things, the book is about self improvement.