Last week’s edition of The Economist published a story about how the U.S. Federal Reserve System writes the “Beige Book,” which is a short collection of anecdotes about the experiences of specific (but anonymous) people and businesses on things like wages, hiring, orders, etc. (“Storytime with the Fed: Low inflation means the Federal Reserve is changing whom it listens to” July 20, 2019) The Fed. compares these stories against their various analyses to form a better picture of what is going on in the economy. Apparently, the Beige Book really does affect their view points. The Economist’s article somewhat disdains their use of stories rather than just sticking with the numbers. After all, shouldn’t serious people follow the facts rather than getting emotional about heart-tugging stories?
My experience has been that indeed stories, paired with good analysis, are essential to putting together a clear picture of something. Without the stories, one can make the wrong conclusions from the analysis or worse, can ask the wrong questions entirely. People can also make mistakes with analysis, especially if it requires complicated math (or even simple math). Stories can be the gut check for this. However, without the analysis, viewpoints can only cover the breadth of available examples. If the only lesson learned you have is a story about something, you are only going to be able to understand cases similar to that story.
In one project several years ago, I was working in a team designing a ceramic-tube heat exchanger. Getting meaningful samples to play with took a long time since we were working with specialty stuff. In the meantime, we continued along with simulation work, spreadsheet calculations, and CAD, accounting for things like thermal expansion, material strength, and the probabilistic nature of crack development. Finally, I got an elegant sample of a tube with a tube joint and immediately started playing with it on my desk upon receiving it. To my horror, I knocked it over and broke it into pieces just hours after taking it out of the box. At that point, it finally sank in that what I was working with was more fragile than a nice wine glass. Sure, the design satisfied all of the load cases, but how was anyone going to handle these things? Our analysis was missing key practical questions until we started developing experiences with samples, in other words by developing anecdotes.
Another case comes from Michael Lewis’ “The Big Short” (Okay, I only saw the movie on this one.). In one fun scene, a hedge fund team in New York is trying to understand whether there is a bubble in the housing market. The data associated with mortgage-backed securities are so complicated that it is hard to make sense of it. They finally confirm their suspicion of a bubble by heading down to Florida to talk to people. A brief trip of talking to a real estate agent, mortgage brokers, and a stripper who owns six homes illustrates to them that mortgage practices in the region are highly unethical and are only temporarily sustained by quickly rising home prices.
On the other hand, relying only on anecdotes can mean taking the scenic route to success. Once while working with Richmond High School’s FIRST robotics team (Team 841 !), a group of students spent 3 or 4 hours and built a quick-and-dirty wooden mock-up of a ball shooter designed to hit a target 10 feet up and 6 feet forward. They used available motors, wheels, and other parts from the last ball shooter they had built the previous year, and they made something like a baseball pitching machine sized for a large Wiffle ball. On the first try, the ball dribbled out of the shooter and went about a foot in the air. This underwhelming artillery demonstration succeeded in providing motivation to work out some math and physics. This showed that their driving wheel needed to be spinning about 8 times faster. After some analysis, the ball shooter was sized appropriately and began to nail the target.
It may sometimes be hard to jump back and forth between analysis and story time, but the results turn out better doing both. The Fed. has even formalized anecdotes into part of their process, and they are better off for it. So, if that computer has been getting too much attention, it might be time to go talk to people. For those extroverts out there, it may instead be time to sit quietly and work out some math. Either way, do both.
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