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“Are you willing to take the risk of investing in bullshit?”

“Are you willing to take the risk of investing in bullshit?”

Interesting headline. It’s not mine btw. It’s a question from a leading banker. The question, in this case, related to investing in data mining … but you will probably find it’s a question asked about any major project.

It’s the skeptic’s question. I’ve been asked it often in various forms. “Where’s the business case?” “What’s the ROI on this project?” “How can you show me this will make an impact on our cost-income ratio?” “Can you prove the numbers?”

The guy asking the question in this case is Matthew Rothman, a Managing Director at Goldman Sachs. Not the sort of title for a presentation from a traditional bank, you might think, and it wasn’t. In fact, Matthew’s presentation was titled: “Data mining: the (un)original sin”.

I found it funny that he was originally going to call it “Data mining: the second oldest profession”, but compliance didn’t like that one, so it wasn’t allowed. Even so, Matthew is quite a provocative guy and got lots of coverage of his keynote by being edgy. I like edgy. You don’t get it enough from banking people, because of compliance and internal handcuff restrictions. This is especially true in some countries, where the internal sign-off process is as lengthy and detailed as getting the Queen to let you off being a Royal. In fact, I think it’s longer.

This indicates the mentality of so many institutions, not just banks. Employees are meant to concur; individual initiative is discouraged, and creativity controlled.

It’s such a shame, as today’s world is meant to be one of nurturing human s kills, not treating people as automatons. I mentioned a while ago that this story exemplifies traditional bank thinking perfectly:

US Bank employee fired for giving $20 of her own money to a customer who was broke and stranded at a gas station on Christmas Eve

Summary of this story is that a call centre worker was dealing with a customer whose salary cheque hadn’t cleared in time for Christmas. Why they get paid by cheque is beyond me, but hey, this is America. Anyhoo, the customer was in distress as they couldn’t pay for their petrol (gas), get home or even buy the kids presents. It was Christmas Eve. The call centre operator felt the customer’s distress and asked her manager if she could drive to meet the guy over her lunch break. He was only 14 miles away. The manager said OK, and she gave the guys $20 to pay for the gas and get home.

Outcome: she and her manager were both sacked for having unauthorised contact with a customer. How ridiculous but hey, this is America.

Any bank worker who has a brain and thinks is usually weeded out of the organisation … unless they wait a while before using that brain and thinking. Then they might get promoted and eventually given the opportunity to use it.

Hence, back to Matthew who, as an MD, has been given his brain but still has controls on how he uses it. He cannot use it to give an edgy or catchy title to his presentation. For example, his second-choice title was “Data mining for dummies”, and even that was disapproved by compliance. So, he went with “Data mining: the (un)original sin”. How dull. And then opened up the dialogue by asking the question: “Are you willing to take the risk of investing in bullshit?” This man has a brain!

Now I agree in part with his thesis. Data mining for data mining’s sake is not useful. Rothman offered three examples of data mining: two real, and one fake. First, a study that found geomagnetic activity could be associated with negative stock returns; a second study that found the length of a trader’s index finger could affect the profit they make; and a third that associated the popularity of Shania Twain’s music with GDP growth. The last one was the fake and Rothman finished by saying “on that, I conclude be diligent, be skeptical and be wary of bullshit”.

Yes, good advice Matthew.

However, that attitude can become a wall. A wall that is like the wall Donald Trump is building to stop South Americans getting into North America. A wall that stops good ideas, that stops innovation, that stops challenge, that stops thinking.

Sure, be skeptical, but be open too. Be open to ideas. Allow new thinking. Allow experimentation.

In fact, I think the real issue here is what is being invested and how much. If you bet the farm on an unproven idea, then of course that is silly. If you test the idea to see if it has legs, then that is the way to overcome the bullshit.

Allow ideas. Don’t just tell everyone this is bullshit.

Anyways, I’ve rarely used this word in its full form so often on a blog but hey, I was inspired by a banker with a brain. Thanks Matthew.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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