Whatever you think about the pros and cons of giving employers greater powers to manage their workforce, the passing of the Beecroft recommendations would have been yet another example of the distain that HM government has repeatedly shown towards evidence-based policy in recent years. Although this is a trend that began long before the current Conservative leaders began their tenure in Downing Street, the current Beecroft near-miss shows this lack of respect for evidence at its most stark.

I must admit that when I first read in a Sky News report about the lack of evidence in the Beecroft report, I assumed that maybe the references were just poor or the report had linked to some poor quality research. However after tracking down the report in question, I soon realised that it wasn’t that the references were bad, but that they don’t actually appear to exist. If Beecroft did do or use any research to support his views he was obviously not that keen to disclose it.

The Beecham report, found here is simply an opinion piece, containing a shopping list of recommendations to the government. The list includes recommendations on
16 areas of policy, including the headline grabbing policies such as unfair dismissal, immigration and redundancy. The London school of economics did an excellent teardown of the paper back in May that branded its influence on policy as “policy witchcraft” and showed just how disconnected paper was with the body of evidence on employment law.

What is surprising to someone like me is that a report like this manages to get credibility within the governing party considering its complete lack of regard for facts (I.e the truth). The document instead makes repeated calls to ‘common sense’ arguments, for example:

…Making it easier to remove underperforming employees will not in the short term increase unemployment as they will be replaced by more competent employees. In the long run it will increase employment by making our businesses more competitive and hence more likely to grow.

Although this makes a level of intuitive sense to me it comes as a bit of shock to someone who has been brought up in the scientific disciplines and expects to read well argued empirical papers. At the very least you would expect to see an attempt to back up this argument, even a link to a Google search would be a start.

Is should be fairly clear that this statement is full of broad assumptions. It assumes that there are more unemployed competent employees than there are employed incompetent employees for a start. Even if this were true, is our employment system set up to get competent employees who have been unemployed for a while back into work? I’m not sure and I don’t have much time for anyone who can be won over by such a simplistic argument.

As a document that could shape policy for a number of years to come shouldn’t we expect a little more rigour?

The lack of empiricism is even more surprising when you consider Mr Beecroft’s background. Adrian Beecroft is currently chairman of Dawn Capital, a venture capitalist firm. His biography on the site shows that he:

has a degree in physics from Queen’s College, Oxford.

… and …

is a sponsor of the Beecroft Institute of Particle Astrophysics and Cosmology at Oxford University. He is also a joint sponsor of the Oxford Academy and … is a Fellow of the Institute of Physics and an Honorary Fellow of the Queen’s College, Oxford.

This blows my mind. Adrian Beecroft is not a scientifically illiterate man, and indeed seems to have, like me, a passion for astrophysics and cosmology. He is clearly no stranger to the scientific method, a tool that could and should provide so much more value in determining the truth behind an idea or a government policy, yet instead we still somehow end up with a document that reads like a daily telegraph editorial. It is an ideologically driven piece of fluff that is fine for what it is and raises many good questions about the status quo in employment law, but should absolutely not be used to shape any government policy, ever.

Adrian Beecroft is a successful businessman and Tory donor with a disproportionate amount of influence on his party’s thinking, but that is not his fault. The real questions should be asked about the entire structure of our political establishment that has sidelined science to such an extent that documents such as Beecroft’s are allowed so much influence.

This is an entirely non-partizan issue and deals with, at its core, the dangerous levels of scientific ignorance in our society, (though not in Beecroft’s case) and a lack of understanding as to how evidence-based policy making is what our country needs more than ever to get us out of this economic rut.

This one, as it turns out was pretty good stuff and by and large my I learned a lot from it.

Except for one thing…

It reminded me of an oft repeated idea that is taken for granted in the business world. The idea that “Its always better to have an opinion”. Like politicians, business people are expected to know a little bit about everything. Where’s the economy heading? Got to have a view. What do you think about this company’s operating model? Got to have a view.

The question that caught me out was during a role play when I was asked “So what do you think my company is worth?”.

“I have no idea” was what I was thinking. But instead of saying that I just ummed and ahhed a bit and mentioned something about the state of the economy and made up something about price/earnings ratios, despite the fact that at that moment in time I had absolutely no idea about the sort of multiples that businesses would trade for in the “client’s” particular industry. I’m not the man to ask. There are plenty of people out there who could come up with a much better value than me as its not my day job.

So when we did the debrief I said that rather than umming and ahhing, I should have said simply that I did not know – its a complicated issue and that there are lots of variables that would need to be considered.

Unfortunately I was told in no uncertain terms that I was WRONG. Apparently it is always better to have an opinion, no matter how uninformed, as it leads to greater “credibility”. So rather than admit defeat I should have tried a bit harder to piece something together from the available information.

Okay then lets give it a go then:

Well the economy is BAD and possibly getting worse, so I could start by saying something along the lines of:

“in the current market, values are being suppressed by a stagnating manufacturing sector – prospects for growth do not look good”.

That sounds credible. Next I could add:

“in times of uncertainty, the number of deals are greatly reduced so you might be hard pushed to find a buyer who will pay your true value”.

Sounds insightful, I like it. I’ve given them two “facts” so I should probably think about finishing with a conclusion. I know that the company is growing faster than the market so how about:

“But in your case, you are growing faster than the market so i reckon there is a good chance you could get at least 10 times earnings.”

Oh okay that was easy wasn’t it! I gave an opinion. See I remember from the somewhere in the recesses of my brain that manufacturing businesses would get about 12-14 times earnings so on that basis, I just gave it a “haircut” (business people loooove that phrase) and lets face it, 10 is such a nice round number.

Sounds pretty credible doesn’t it, doesn’t really matter that I made it up. “But Come on”, you might say, “its just an informal business conversation, its not like you’ve just signed off a bid document or anything, right?”

Well, yes in isolation it is pretty harmless but the danger is that the abilty to confuse make-believe and real knowledge seems to be one that is virtually universal across our species. By stressing the need to have ‘valid’ opinions on everything under the sun, we run the real risk of stoking this confusion even more. It can turn business conversations into big back-patting exercises where its not the best idea but the most intuitively convincing one that is likely to get the nod. From that point onwards the idea gets propelled forward by confirmation bias and the cherry picking of evidence to support theat view. It morphs into a juggernaut of an idea that eventually destroys all before it.

Take for example the idea of the Triple-AAA rated subprime mortgage securities. Before the credit crisis, evreyone rated them triple A. Funny coincidence eh? I would love to find out who was the first person to give them that clean bill of health, the mental gymnastics must have been incredible. The thing is that once that had happened, no-one else had to bother.

“Hey look, Dave has paid AAA prices for them, therefore that must be their value”.

And as a result the banks gorged themselves in an orgy of investment until they were on (possibly) every single bank’s balance sheet (or off it, if the bank was really lucky).

Imagine a world where Dave had said “god these securities are complicated, theres no way we’ll be able to accurately value them. Perhaps its not such a good idea to trade them.”

Bad luck Dave you’ve just lost your job. Phil over here has valued them using some fancy looking formulae and has valued them to the nearest 0.5p. Face it Dave, Phil is the future, and we’re going to pay him a huge bonus as he’s just made £1 billion selling them to Northern Rock.

And thats the point. The real reason why its a good idea to have an opinion in business is because if you don’t someone else will. And they will get the deal.

so when they say that “its always a good idea to have an opinion” they’re probably right.

But for all the wrong reasons.

It comes from an understanding that in todays society of the internet and democratised knowledge, anyone seems able to make whatever claim they feel like without the inconvenience of proving whether it is actually true. It doesn’t take long browsing the internet to find individuals that claim to cure pretty much any disease, improve balance using magnets or even defuse roadside bombs using pure magic. (and the Iraqi government bought it! That has to be one of the most tragic occurrences of facepalm in all of history). Lets just say that I don’t expect any sort of scientific proof of concept for any of these to appear anytime soon.

As mentioned above we live in a world of democratised knowledge and by this I mean that we live in a society that appears to value personal opinion above verifiable fact. The validity of a viewpoint is more dependant on the number of people who hold that view than on any measure of plausibility or the weight of research and evidence behind that viewpoint.

In the last few years I have developed a lack of trust in the things people tell me. I’m sceptical about all sorts of things. Why do Accountants get paid more than teachers? Are they really worth more to society? Is someone earning £1m a year really a thousand times more useful than someone earnin £10,000? Does any one really know what the “economy” actually is???

In fact I get fairly sceptical about whether I’m actually too sceptical for my own good, which you must admit is pretty confused.

After more than a quarter of a century of confused, curiously untrusting existence I have decided to record the whimsical meanderings of my muddly, jumbly brain and try and make sense of it all. The aim for this blog is to bring order to the disorder and method to my madness.

Time for some actual content I guess…

For more info on how skeptics (with a k) define themselves try some of the following links

http://en.wikipedia.org/wiki/Scientific_skepticism

http://www.skeptic.org.uk/ – Home of the Skeptic, uk based magazine
http://www.littleatoms.com/ – Home of the Little Atoms Podcast – covering ideas of the enlightenment
http://www.skepdic.com/ – A page that tackles some of the more far-out claims made my Pseudoscientists, Paranormalists, Alt-med practitioners and junk-scientists

Whether this ever gets answered is another question entirely. After all, now I have made a claim that this is a blog about science,  I must play down my own anecdotal experiences and intuition and ponder what empirical evidence exists to support the hypothesis that science in business would be beneficial for society. I suspect that, as for many questions in social science, the answer is not clear and so fully expect this blog to become more of a philosophical exploration of the main question and related questions, rather than a spirited but largely futile attempt to answer it.

I should state now, however, that I am extremely pro-science. It is my personal belief that scientific discoveries have done more for society and the economy in the last 100 years than any other developments. For example I suspect that it was the development of the personal computer and automated manufacturing processes (and possibly cheap 3rd world labour, unfortunately) that contributed more to economic growth in the 1980s/1990s than any other factor and that scientifc medicine has been the single greatest contributor to the current longevity of our species.

As a result of my belief in science, i do think that the question I posed in the first paragraph is a fundamentally scientific one, whether we currently have the tools to answer it or not. By this I mean that the question is theoretically testable. Perhaps we could compare organisations that are run on more scientific principles to those that are not. Are they more profitable? do they contribute to society? Are they better to work for? Maybe we could compare the performance of regulators that set the economic rules and incentives using evidence-based principles to those that don’t. Does that have an impact on a nation’s competitiveness? Is competition between nations for big business even a good idea?

So to what does all this boil down? What is it that has inspired me to start this blog?

Simply this:

I am fundamentally interested in whether or not there is more scope for scientific and critical-thinking in business, an arena that would not normally be considered their natural home.

Business is a fast paced world of snap decisions, gut feeling and the projection of confidence. More fundamentally it is a world of limited information and unknown consequences. It is a place where failure requires blame, good decisions are perceived as being due to skill and bad decisions are never, EVER down to bad luck.

“I don’t know” is never an acceptable answer in business. I tried it once. I even said that not only did I not know answer, but that there was clearly not enough information to form a valid conclusion. It turns out that means I was “weak”, and the other guy that did “know” the answer was “stong”. They went with his decision and as a matter of fact it did not work out too badly for all concerned. How much of that was skill and how much was luck? I’ll never know. But i do know is that there is very little incentive for someone to decline to know the answer.

“I don’t know” is of course a key scientific principle. The word ‘hypothesis’ is basically code for “I don’t know but it would be a good idea to find out, don’t you think?”. The scientific method is the tool that scientists employ to try and understand those “I don’t knows”. It works. It works extremely well. But it does have its limitations. The main one is speed. Gathering scientific evidence is a slow process. It doesn’t easily lend itself to a pre-acquisition due diligence exercise when the deal must be signed next friday! Its also not that effective for deciding which of product A or product B to sell, as the sales data will only be available after the event.  These are good reasons for not using the scientific method in business. But does this lack of science go too far?

What is the proper balance between gathered evidence and snap judgement? This is what I will explore the most. Evidence vs anecdote, considered opinion vs gut instinct, Steven Hawking vs Alan Sugar – these will all be fair game for the City Skeptic.

So let me introduce myself. My name is Andy and I am a skeptic.

Welcome