The term expertise has evolved with the data revolution. There may be experts of 30-50 years of experience. But these experiences are useless without updated data. Whether it is markets, statistics, operation procedures, it doesn’t matter. The only expertise is the constantly updated data. And in the case of energy problems, data is the fabric of reality.
In the past, the expert was someone who had immersed herself in all the details of a specific subject. They were like the walking google engine for these particular subjects. But today, all these data are available even in open sources. Satellite images are far beyond the reach of past experts, and data chunks are more cumbersome than any human brain to deal with. Today the expert is the one who can update, filter, and prioritize.
In these situations, onion is an excellent metaphor to start with. The layers of an onion are one of the ways you built these analyses. So what should be at the core of this analysis? It is either data or direct information. No comments or “assumptions” should be made. This is the think-free approach. You just pick the “real information” and create the core.
One of the challenges of our time is the widely and wildly disseminated comments. Probably for every one sentence of accurate information, we have 100 pages of comments. Some of these comments are extremely attractive. But lies are attractive, too. The reality is generally dull, boring, and colorless. Lies, on the other hand, are seducing, believable and colorful.
In the latest energy crisis, there are zillions of comments about the price rises, the recent hikes, and why this is happening? Most of these comments have few data points and layers of assumptions. We are so addicted to our thinking and ability to solve events like Sherlock Holmes we approach it like Tetris. However, the first rule of all good analysis starts with “question the assumptions.” The most critical assumption is that “price stability is the norm and volatility is an exception.”
In most of the analysis, we are captivated by the interesting connections revealed by the commentator. But what do these interesting comments mean? Like TED talks, they are captivating but have no use, or they may distort the truth. The relevant questions are not there. They hide in boring places, like the price level that can crash consumer demand.
Therefore, the most dangerous thing in the energy business is to attribute a lot of value to your expertise, your tastes for analysts, connections, and knowledge. So, start with firsthand knowledge of the event. I spent a lot of time reaching these sources, whether from open sources, satellite images, or data files. This is the kernel of your onion: the solid, comment-free, assumption less, reality mirroring information.
Around the core, build everything with firsthand sources numbers until you complete each layer of your analysis. The last part is humility. This is not the correct model. But you may spot the areas of possible mistakes and deviations. The correct analysis informs about the failures of its analysis.
We should not let our great ideas, thoughts, and IQs derail the flux of reality. History is important and is a great toolbox. But every day is a new challenge. Start with a think-free analysis because you will need your thinking for inventing solutions.
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