The impulse strikes back – with Simon Evan-Cook

Simon Evan-Cook, our guest on the 50th episode of The Value Perspective podcast, worries that the rise of C-3PO-like thinking is crushing our inner Han Solos and asks, should the stats always be with you?

15/07/2022

Juan Torres Rodriguez

Juan Torres Rodriguez

Fund Manager, Equity Value

Andrew Williams

Andrew Williams

Investment Director

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Which Star Wars character do you most identify with? Always assuming you have an answer to such a question, we are guessing you did not reply C-3PO. Han Solo, Princess Leia and Luke Skywalker would be favourites – maybe even, say, Chewbacca, Boba Fett or R2D2 – while, in our experience, a few people seem to have channelled Darth Vader in their career. But the fussy gold robot makes an unlikely role-model.

And yet, according to multi-asset fund-of-funds manager and blogger Simon Evan-Cook, there are legions of C-3POs to be found in the world of business – and particularly among senior decision-makers. Evan-Cook appeared on a recent episode of The Value Perspective podcast – our 50th as it happens – and we took the opportunity to ask him about an idea he advances in his blog,

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In a post entitled How to make better decisions: my 12-point checklist, he discusses how people – and “particularly those currently ‘in power’” – are relying more and more on numbers and probabilities than gut instinct. Given how often we discuss the benefits of probabilistic thinking, here on The Value Perspective, we have a lot of sympathy with that development – but Evan-Cook argues it can go too far.

“Actually, when you stand back and look at society currently, I believe it has gone too far,” he tells us. “When I compare the so-called ‘system one’ emotional brain and the more rational ‘system two’ approach to a situation, I like to reference that brilliant scene from The Empire Strikes Back where Han Solo and the rest’s only chance of escape from Darth Vader appears to be to fly the Millennium Falcon into an asteroid field.

Read more from The Value Perspective: 'Thinking Fast and Slow' – Two big lessons

“And those two types of thinking are represented perfectly by Solo, who is all for the plan, and C-3PO, who tells him his odds of success are ‘approximately 3,720 to 1’. That is a great example of Bayesian thinking where you put a probability on something and it just slows things down. Whereas Solo, who is very much an instinctive decision-maker, just snaps, ‘Never tell me the odds’ – and flies into the asteroid field anyway.”

Against the odds

In his professional life, Evan-Cook says he meets lots of ‘Han Solo’ investors, who are very happy to buy and sell on instinct, and also a lot of ‘C-3POs’, who crunch the data and crunch it again in order to eliminate any trace of gut feeling. “After all, if you are a Han Solo character and you defy odds of 3,720 to 1 only to get blown up – well, what were you expecting?” he points out “That was obviously a really stupid thing to do.

“So it is right to pause and say, I need to think about this – but our world has gone too far in listening to the C-3POs. Academics quite often fit into that camp as do a lot of senior decision-makers – particularly if they like to rely on accounts or Excel spreadsheets. So you also need to say to a C-3PO, hang on – let’s look at what you’re saying here as well because, those odds you just quoted at me, what are they based on?

“Let’s unpack your 3,720 to 1 because what data have you used to calculate that number? First of all, is there survivorship bias? Or quite the opposite, actually! I mean, who keeps records of whether a ship has actually successfully navigated an asteroid field or not? Furthermore, how big is the spaceship you’re in? How well does it manoeuvre? How fast is it travelling? And how good is the pilot actually flying the thing?

“All of these things are variables and I have no way of knowing if C-3PO included them all in his odds but – spoiler alert! – Han Solo does survive. So either he was one of those unbelievably lucky guys who are the one in 3,720. Or he was actually a skilled pilot flying a very manoeuvrable ship, who actually made the right decision because the alternative was being captured or blown up.

“After all, what are the odds of actually surviving a fight with a star destroyer? You didn’t mention that, C-3PO! So there is a danger that you can be put off making the right decision because you get caught up in statistics – and quite often those statistics can be wrong.” Indeed, if your science fiction preferences are more Star Trek than Star Wars, you can find a similar dynamic playing out between Captain Kirk and Mr Spock.

Highly illogical, Captain

In her book The Scout Mindset, Julia Galef illustrates how the more certain Mr Spock is that a course of action must end in failure, the more likely it is that Captain Kirk ends up defying the odds and saving the day.

“That clash between Kirk and Spock was the basis of almost every episode of Star Trek,” agrees Evan-Cook. “So often it was Spock saying, that is not a logical thing to do – and Kirk going ahead and doing it anyway.

“And, because we like Han Solo more than C-3PO and we like Captain Kirk more than we like Spock, we end up rooting for that kind of decision-maker. We want the gut decision to be right and we want the geek to be wrong but the truth is the geek is right a lot of the time. Equally, though, there are times when they are not right and that is why it is proper to consider how far is too far with probabilistic thinking and what gets lost.

“My concern with how far, if you like, ‘C-3POan’ or ‘Spockian’ thinking has gone is – what are you missing sometimes when you just focus on the data? And, in fact, movies are a great example in this context because, while Star Wars is a fantastic movie and has spawned this enormous multi-billion franchise, would it get made today? Or would C-3POan thinking mean the original Star Wars never got made?

“Increasingly, the people deciding whether to greenlight a new movie are just saying, show me the numbers. That is why so many sequels are getting made. When I went to the cinema recently, almost every trailer was for some kind of sequel, reboot or spin on an old idea – and, to be fair, I was there to see the Top Gun sequel! But something like The Matrix, which is one my favourite movies, might now never get past the accountants.

“You would have to prove to them that this strange idea would make money – and you could not prove that. But this goes far beyond science fiction movies and my concern is this sort of intuitive gut-feel is being taken out of all sorts of areas of our life and we are being left with something that might be safe but it is also dry and boring and does not necessarily create the next amazing experience we could all be looking forward to.”

Author

Juan Torres Rodriguez

Juan Torres Rodriguez

Fund Manager, Equity Value

I joined Schroders in January 2017 as a member of the Global Value Investment team and manage Emerging Market Value. Prior to joining Schroders I worked for the Global Emerging Markets value and income funds at Pictet Asset Management with responsibility over different sectors, among those Consumer, Telecoms and Utilities. Before joining Pictet, I was a member of the Customs Solution Group at HOLT Credit Suisse.  

Andrew Williams

Andrew Williams

Investment Director

I joined Schroders in 2010 as part of the Investment Communications team focusing on UK equities. In 2014, I moved across to the Value Investment team. Prior to joining Schroders I was an analyst at an independent capital markets research firm and hold a Economics and Politics degree.

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