Big Data Must Die

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On our annual ski trip, we decided to ride the California Zephyr, which cuts an unimaginable path through the Rockies.  We arrived at the terminal in Denver at 7 am to check our bags and were greeted with something that looked like it came off the set of Indiana Jones.  The luggage cart with steel wheels and wood slats was being commanded by a mousy attendant that could not have been more than 5’3”.  Maybe Amtrak relishes the old stuff, or maybe they just don’t have the budget for the new equipment.  Either way, as rustic as the equipment was, it worked.

I began pondering the unnecessary conveniences of modern life as we traveled the rails to Glenwood Springs, Colorado and remembered a Freakonomics Radio podcast called “This Idea Must Die”. In it academics share their thoughts on what revelations of modern life must die if we want to make progress. In one vignette, Columbia University professor Emanuel Derman laments about the modern day use of statistics and big data to unravel the mysteries of the Earth. “Everybody’s interest in economics and big data have all come together in some sort of nexus to make people think that just looking at data is going to be enough to tell you the truths about the world.”

He goes on to say that all the great discoveries in physics have come from “bursts of intuition” not data. He does not believe you can find the deep truths in life by simply looking at correlations and statistics. And my favorite sentence from his speech sums up perfectly the failure of financial planning and Wall Street to address the real challenges we face in life:

“It’s sort of what’s wrong with a lot of financial modelling too, the idea that somewhere there’s a formula that will tell you how to manage risks, tell you how to price things, and absolve you of the responsibility of the struggle to actually understand the world in a deeper way. And in the financial crisis, too much reliance on statistics is what got people into trouble.”

Financial planning has moved from thoughtful reflection and common-sense advice to data-driven forecasts which ignore the most fundamental component of success — You.  In 2012 we created the Blue Pages, the first financial planning software package that abandoned big data, because we know from experience that people succeed or fail based on the personal decisions they make each day.  While this is not the easy path, it works.  Just like the steel-wheeled luggage cart.

If you’re interested in learning more about the Blue Pages, call us at 404.257.3317 to start the path to your Point of Independence.