Trust your gut vs. trust your data?

Jeff Bezos noticed a crucial insight about business decisions.

He found that when anecdotes and data clash, the anecdotes are usually right.

We’re going to show you how to bridge the gap between your gut and data and how to apply this tactic to your life: 👇

Today’s Briefing

• Insight: Why You Should Trust Your Gut 🤓

• Story: Trust Your Eyes, But Verify with Numbers 👀

• Action: How to Bridge the Gut-Data Divide 📊

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INSIGHT

Why You Should Trust Your Gut 🤓

The Big Idea: In baseball and business, the most valuable insights often lie in the gap between conventional wisdom and hard data.

1. Question Everything: Just because something is widely accepted doesn't mean it's correct.

2. Anecdotes Are Data Too: Qualitative information from scouts (or customers) can reveal truths that numbers alone might miss.

3. Look for Disconnects: When anecdotes and data disagree, that's where the gold is.

4. Synthesize, Don't Choose Sides: The magic happens when you combine quantitative analysis with qualitative insights, not when you pick one over the other.

Remember, in the battle between gut feelings and spreadsheets, the real winner is the one who knows how to use both.

Before we dive in, here’s the top links you should pay attention to:

Bullish Briefs

We are trying out a new section that includes the latest headlines that you should pay attention to. Let us know what you think in the poll at the bottom.

• Google was ruled to have an illegal search monopoly by a U.S. federal judge, a major antitrust victory to those in favor of breaking up big tech.

• Dow Jones tumbled 1,033.99 points in its worst day since 2022, amid a global market sell-off sparked by recession fears.

• AI deployed at the 2024 Paris Olympics to shield athletes from online abuse by scanning millions of social media posts in multiple languages.

• Zombie condos appear in Miami as developers' forced buyouts face legal challenges.

• Scammers impersonating airline customer service agents on social media, target frustrated travelers during flight disruptions and delays.

STORY

When Your Instincts Fight Your Spreadsheets 💻

The Big Idea: When gut instinct clashes with data, dig deeper to uncover hidden truths.

Why it Matters: The Oakland A's revolution proves that marrying anecdotal wisdom with smart analytics can turn underdogs into champions.

Billy Beane, the baseball executive who transformed the cash-strapped Oakland Athletics into a playoff contender against all odds, built a winning team by balancing both scouting insights and statistical analysis.

The A's couldn't afford to ignore their scouts' instincts, but they also couldn't blindly trust traditional stats. Instead, Beane and his team found success by thoroughly investigating situations where scouting reports conflicted with their data.

This approach of reconciling conflicting information from different sources became a cornerstone of the Moneyball strategy.

By carefully examining these discrepancies, the A's were able to identify market inefficiencies and build a competitive team on a fraction of the budget of their rivals.

This is an extreme version of what Jeff Bezos calls the anecdote-data disconnect. On paper, Beane was a General Manager (he ran the team and made trades). In reality, he was a detective (he investigated discrepancies to uncover hidden value).

Here's some other rules Beane implemented:

• Neither scouting nor stats are infallible, so question both

• Just because the numbers or eyes say something, doesn't mean it's the whole story

• Only sign players after reconciling scouting reports with advanced metrics

• Make rules and keep them, like "always investigate major disconnects"

• Hold true to your process, so if you can't explain a disconnect, you don't make the move

• Go for synthesis over choosing sides, meaning find ways to make scouting and stats work together

Beane built a competitive team by finding truth in the gaps between old-school wisdom and new-age analytics. Apply the same approach to your work and you're bound to uncover hidden opportunities.

Key takeaway: When your gut and your spreadsheets disagree, that's your signal to dig deeper. Embrace these conflicts, investigate relentlessly, and watch your insights explode like a perfectly predicted breakout season.

Go Deeper: Here’s a 12-minute narration of Moneyball, the 317 page book from author Michael Lewis.

ACTION

How to Bridge the Gut-Data Divide 📊

Here's how to harmonize your instincts with hard data:

Step 1: Embrace the Conflict: When your gut screams one thing and the spreadsheet another, don't panic. You've just stumbled onto potential gold. Get excited about these discrepancies like a detective finding fresh evidence.

Step 2: Dig Deeper into Data: Before you trust those numbers, play data detective. Are you measuring the right things? Is your sample size big enough to matter? Remember, even Excel can lie if you feed it the wrong questions.

Step 3: Interrogate Your Gut: Your instincts aren't infallible. They're shaped by experience, but also by biases. Ask yourself:

• Confirmation Bias Check: Am I just seeing what I want to see?

• Recency Effect: Is a recent event coloring my judgment?

• Authority Bias: Am I trusting someone's opinion just because they're a "guru"?

Step 4: Seek the Middle Ground: Now's the time to play peacemaker between your gut and your graphs. Look for explanations that could satisfy both. Maybe your instinct is picking up on a trend the data hasn't captured yet, or vice versa.

Step 5: Test, Learn, Repeat: Don't just theorize - experiment! Set up small tests to validate your hybrid gut-data hypotheses. Use the results to refine your approach. Congrats, you're now doing the business equivalent of A/B testing your own brain.

Master this, and you'll be making decisions with the instincts of a seasoned pro backed by the precision of a supercomputer. You'll be the Billy Beane of your industry, finding hidden value where others see only numbers or hunches.

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Publisher: Jordan Belfort

Editors in Chief: Brock Swinson and Davis Richardson

DISCLAIMER: None of this is financial advice. This newsletter is strictly for educational purposes and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.