Reuben Beelders

Megan Fraser

July 2023

We live in a society where precision is valued, admired and above all, expected! Transatlantic flights arrive on time, cell phones ensure that we can pin venues and share live locations so that we don’t have to deal with unexpected delays. A plethora of weather apps ensure that we can pack appropriately while traveling lightly (although for Cape Town, not so much).

What we don’t have an app for is how to help deal with our spouses, our children and our fellow human beings; they continue to confound us with behaviour and decisions that do not align with our expectations…nothing precise about that.

Have recent technological advances created the illusion that precision is the norm?

Perhaps so in various aspects of life. Technology has enabled us to gather and process vast amounts of data, perform complex calculations, and achieve highly accurate results in many fields. This has resulted in the notion that we should be able to attain precise and definitive answers to all our questions and challenges.

This abundance of available information is now on steroids by virtue of the impact of artificial intelligence.

Now is as good a time as any to ask the fundamental question: How precise do we really need to be; where is the balance between efficiency and effectiveness?

Efficiency is defined as the ability to accomplish a task or goal with minimal wasted resources. It emphasizes maximising outcomes, while minimising input.

Effectiveness relates to the degree of success in achieving desired outcomes. It focuses on doing the right things in order to attain the intended results. Effectiveness is ultimately concerned with the outcome rather than the resource utilisation.

Here are some real-life scenarios that most of us can relate to that demonstrate situations where effectiveness trumps efficiency:

  1. Medical diagnosis: when a patient visits a doctor with complex symptoms, it’s essential for the healthcare professional to focus on effectively diagnosing the underlying condition rather than rushing through the process for the sake of efficiency. The doctor may need to conduct thorough examinations, order additional tests, and consult with specialists to accurately diagnose the patient’s condition, even if it takes more time and resources.
  2. Crisis management: during a crisis, such as a natural disaster or a major security breach, the primary objective is to ensure the safety and well-being of individuals involved. This requires prioritising immediate response, rescue operations, and providing essential support to those affected, even if it requires deploying additional resources or temporarily diverting from normal processes. (Although Gift of the Givers seems able to work magic effortlessly.)
  3. Customer complaint resolution: when a customer lodges a complaint with a product or service, customer service representatives need to take the time to understand the issue, empathise with the customer, and provide a satisfactory resolution, rather than rushing through the interaction to reduce call times or ‘close the file’.

The profusion of information in the digital age has undoubtedly complicated the investment landscape. Information overload, for example, because investors have access to an overwhelming amount of information about markets, companies, economic indicators, and investment strategies making it challenging to filter through the noise in order to extract relevant insights. They are constantly bombarded with real-time news updates, social media commentary, and market rumours, very often provoking them into sentiment-based, impulsive reactions based on short-term market movements rather than long-term fundamentals.

Have we become too efficient at analysing data, producing information and interpreting the narrative… none of which produces better risk-adjusted returns?

Investors need to develop critical thinking skills, practice information filtering, and maintain a long-term perspective to be able to navigate the data-swamp.

Are global stock markets a little expensive right now, or very expensive?

How much does it matter in an effectively managed portfolio?