Tag Archives: Facts

Facts and stories

Some stories are based on a comprehensive review of all available facts. However, most stories are, at best, collections of cherry picked facts pulled together with the goal of convincing the reader to adopt a particular view. At their worst, many stories don’t contain any facts.

However, the facts are always there. Sometimes they emerge and a story based on cherry picked facts, or no facts, collapses. Sometimes they don’t and such a story continues.

Which outcome prevails depends on a combination of the power of the people telling the story, the availability of the facts, and the degree to which a comprehensive review of the facts supports a single view.

In the context of startup investments, most news articles about startups are stories. A startup’s financial statements and KPI’s represent the facts.

Complex and simple systems

Simple systems have clear links between inputs and outputs. If certain knowable conditions are met, there’s a well-defined function that maps the inputs to the outputs.

Complex systems are different. They feature multiple actors that offer up a probability distribution of inputs which interact in context-specific functions with partially knowable forms and indeterminate weights. The outputs which are produced as a result are therefore impossible to predict with full accuracy. Our best bet is to develop increasingly educated guesses.

As a result of the different nature of simple and complex systems, the approach necessary to succeed when working with each is different. In particular, working with simple systems requires knowledge of the facts.

In addition to knowledge of the facts, working with complex systems requires an understanding of the incentives of different actors, an iterative approach to testing these incentives and how their interactions produce outputs, and a readiness to revise the form and weights of the context-specific functions you develop as you learn from experience.

Since simple systems are easier to solve, many people solve them. So you’re likely to get immediate positive feedback from someone after solving a simple system.

Since complex systems are harder to solve (in fact you can’t fully solve them and have to be content with getting gradually closer to solving them), there are fewer people solving them. This means that there are fewer people there to give you immediate positive feedback on your progress.

Making progress towards solving complex systems also takes more time, so the frequency of feedback is lower than that which you get when solving simple systems.

However, the intrinsic and extrinsic rewards from making progress in understanding how complex systems work are much greater than the rewards from actually solving simple systems.

Words, facts, and emotions

Eric Weinstein, a mathematician and economist who is also managing director at Thiel Capital, wrote an excellent piece on what he believes is the most important scientific term or concept that ought to be more widely known. It’s called Russell conjugation (or emotive conjugation) in honor of philosopher Bertrand Russell and, stated simply, it shares that words have two layers, a factual layer and an emotional layer.

From the example in Eric’s piece, each of the phrases below suggests that people don’t change their mind. That’s the factual component. However, the perception that you have of each person after reading the phrase is different. And that’s the emotional layer.

“I am firm. [Positive empathy]
You are obstinate. [Neutral to mildly negative empathy]
He/She/It is pigheaded. [Very negative empathy]”

As shown in this example, the emotional layer sometimes simply reflects who is being talked about. If you’re describing yourself, you’re likely to use a word with a more positive emotional connotation than if you’re talking to someone else in the same room. And if you’re talking about someone else who isn’t in the same room, it’s easier to use a word with a more negative emotional connotation.

I have two key takeaways from the piece.

The first is to, to the extent possible, extract the factual and emotional layers of the information you absorb. The factual layer reflects the communicator’s perception of reality while the emotional layer reflects how they feel about that reality. Both are valuable signals.

The second is to choose your words carefully. Your recipient will interpret what you say based on the emotional connotation of your words to the same if not to a greater extent than their factual content.

I highly recommend reading the full piece which you can do so here.