Tag Archives: Reality

Facts may be optional. Reality Isn’t.

“People that say that facts are facts — they’re not really facts . . . there’s no such thing, unfortunately, anymore of facts. And so Mr. Trump’s tweet amongst a certain crowd . . . are truth.”     Scottie Nell Hughes, a Trump surrogate.

Last month, I was mildly disturbed to learn from the media that my profession of auditing, as well as the professions of science and journalism and medicine and to some degree law, have all been rendered irrelevant by a society that has elected to disregard fact and truths that emanate from facts, and embrace opinions posing as truths and  rooted in thin air,  grown in the hothouse of anger and ignorance.

Such was the result  of the election postmortem in which the Forces of Trump declared that facts no longer matter.  It’s what people choose to believe, by whatever means they come to their beliefs, dubious or otherwise.  You have to give them their due; their election results have validated their hypothesis, at least in the short-term.

But in the short or long-term, ‘truths’ must ultimately reconcile with reality, or they are not true.  Reality trumps belief.

I’m not worried about job security.  But my job and those of my colleagues in various organizations and capacities become more difficult when we operate in a world where our stakeholders demand the facts they want to hear to comport with the beliefs they cherish, rather than the facts they need to know in order to define the truths that will sustain them.

My profession of auditing is about reconciling ‘truths’ as have been reported  in financial statements to supporting facts, and reconciling those facts with reality.  Reality is the key here.  It is immutable.  It can be ignored for only so long, but eventually, it dominates.  See sub-prime mortgages, LIBOR, pension plan assumption of returns s on investment versus realized returns, unemployment statistics versus household income, the Boomer generation’s retirement aspirations versus asset accumulation, military budget versus military power effectively and conclusively applied, health spending versus health outcomes.

Let’s do a brief overview of the information ecosystem as it has evolved with human-kind.  In the beginning, all that humans needed to know confronted them directly and often overtly without any subtlety or obfuscation of intent: hunger, climate, illness and injury, bigger predators, or more aggressive predators of kind from two caves down the road.  Threats were immediate; responses were immediate or irrelevant; outcomes were immediately determinable and of little interest to anyone but the subject and his immediate dependents.

But we evolved, dare I use that term.  We learned from  experiences that informed our understanding of our environment, limited as it was, and we explored options. Our experience became intelligence, accumulated information that we could draw upon with the same utility as stone tools.  Intelligence gradually replaced emotion as our considered response to events that confronted us.  And as intelligence grew, we concluded that we could control events to our preferences rather than be at their mercy.

Eventually as we became more complex societies, probably due to facing more daunting challenges that could not be overcome alone, we determined the need to share information. Our languages and means of communicating evolved with the scope of our experience and the sphere of our social engagement.

Information at this stage became more symbolic as it was shared beyond the bounds of an individual’s personal experience or observation and confirmation.  And the more symbolic it became, the greater risk that  it diverged from the reality it represented.  So if I had two shiny rocks in my hand, I knew I had two shiny rocks in my hand.  But my shiny rocks might not be the same as the fella’s downstream, and without some reliable way of differentiating them and explicitly communicating what each of us has, we really haven’t communicated very much.  Facts matter.

The rest, as they say, is history.  Trusting that you can see where my primitive example is going, I won’t belabor it, but will get to the point.

Our sustainability  as individuals and as a  society is based on an informational paradigm that goes something like this:

Sustained existence depends on productive action against forces of decline and deterioration.

Productive action depends upon proven theories or ‘truths‘ of how the universe works (scientific law and principles, public policies, law, social customs, business models).

Truths depend upon a system of facts and logical relationships among those facts that inform actions which understand reality and reliably achieve intent.

Facts are symbolic representations of realities that we seek to understand  and communicate in order to relate to them in intended ways.

Reality is immutable, irrefutable,  and will ultimately trump (small t) all else.

But over time, a problem has developed with this paradigm. As our world has become more complex and our spheres of dependency have expanded, we have depended on ever-growing networks of intermediaries to give us the facts that we depend on for truth and guidance for actions that we hope to take for our sustainability, and hopefully our prosperity beyond the barest requirements of our existence.  And to repeat, those facts are symbolic representations of reality, not to be confused with reality itself.

So what could possibly go wrong with this?  First, we may not gather all the facts we need.  Second, the facts we gather may be imperfect representations of the reality they purport to represent. Third, the intermediaries we rely on for facts may be incompetent or deceitful in providing information we can relay on. Finally,  we may choose to exercise concerted ignorance to the facts that do not comport with our preferred beliefs or ‘truths’.

When facts are compromised or disregarded, our sustainability is at risk. When the truths on which we take action no longer comport with reality, there will be a collision between our expectations and reality, often referred to with the euphemism ‘unintended consequences’.

    *    *    *

We should distinguish between truths and opinions.

Opinions can exist free of facts, dangerous as that is.  Truths cannot.

Truth:   “the property (as of a statement) of being in accord with fact or reality”

Opinion: “a: belief stronger than impression and less strong than positive knowledge b :  a generally held view”

For example, I may have an opinion that my pension fund will be able to meet projected obligations based on an assumed rate of return of 8% over time, but if historical facts inform that I am only earning 3%, and known information does not provide credible basis for a prudent person to reasonably expect that 8% or better will be achievable in the foreseeable future, then my opinion on the assumed rate will not matter against the truth of realized (real) rates of return.

Short form:

Facts do not always fully or accurately represent reality.

And Truths and Opinions are not always supported by complete and accurate facts.

But truths and opinion without complete and accurate facts will inevitably collide with Reality.

And Reality will always win.

I hope we have enjoyed this respite from facts in 2016.  2017 awaits, as does Reality.



In our next exciting episode: Escalating Ignorance in the Information Age


Reality: Words that Don’t Inform

This week’s word that doesn’t inform is the word: Reality.  We all know what it means, or do we?

The gospel according to Merriam-Webster says: “the true situation that exists.”  Really?

I’ve been a fan of ‘reality’ ever since my college days in the sixties when one of my favorite pieces of bumper sticker philosophy opined: “Reality is a crutch for those who can’t face drugs.”  It was my crutch.  I found reality, as I perceived it, much more entertaining, although today it is having the feel of a progressively bad acid trip, (not speaking from experience).

The key word in the preceding sentence is the word: ‘perceived’, because it is on that word that much of our sense of reality hangs, since we rarely enjoy the luxury of having all the facts about anything to know what is real.

In my role as an auditor, I’ve been all about ‘reality’.  After all, the mission is to take a representation of some kind and validate it to substantive underlying ‘facts’ or processes that can be verified as real, true or reliable by some measure, so that investors and other stakeholders can rely on such representations for sound decision-making.

The role of ‘perception of reality’ was brought home to me yet again yesterday in an exchange of correspondence with a legislator regarding regulatory and legislative initiatives for response to long-term sea level rise and repetitive coastal damage.  In my presentations to legislators and other government officials I often urge them to align their efforts with future projected ‘realities’, and not with voter perceptions in the present, too many of which are in denial.  My argument has been presented thusly:

‘You folks can do anything you want in the legislature and Congress. Frankly, Mother Nature doesn’t give a damn. Your task is to anticipate as best you can what may happen, and deal with it in Nature’s terms, because Nature will have the final word.’

But those legislators’ constituent perceptions are legislators’ ‘realities’.  The fact that they must act now to prepare for a contingency does not seem real to them until that contingency becomes a present or very near-term reality, in which case many best responses will no longer be possible. Alternatively, the risk that voters, less informed on the issue than their legislators (in some cases) may resist sacrifices that they do not perceive (there’s that word again) as necessary is the legislators’ reality.

How do we reconcile the two? Which reality is real?  And  which ‘reality’ trumps? In our short-term, Attention Deficit Disorder, all-about-me society, the here-and-now is the only reality.

Let’s take ‘reality’ for another test drive:  Iran and nukes.  Let’s take a little quiz.  Are the Iranians really crazy, or is that more of a self-serving front to a basically rational, if brutal, power structure that is no more myopic in its world view than we? If they get nukes, will they be any more reckless than the Russians’ whose power we were able to contain through deterrence?  Are they a bigger threat than Pakistan, which has gladly proliferated technology to bad guys crazier than they?  Are they a bigger threat than the Russians who, in their current status as a kleptocracy, are possibly less capable of controlling their weapons inventory and as ethically inclined as the Pakistanis to sell it on the black market to bad guys who are certifiably crazy, or in a milder form, think they can live out the fantasy of a James Bond villain? Where are the real threats? Which threats are relatively greater?

How about the economy?  Are the 1%ers fairly compensated for their risk-taking and managerial excellence, or are they merely the most clever people who know how to legally skim value by short-changing customers, deceiving investors, and underpaying their employees and vendors the true value of their efforts through asymmetric exercise of market power?  What’s the truth? What’s the reality, and how do you determine it?  In Capitalist Theory, The Market determines it.  The Market establishes real value.  Do you think The Market is doing a great job?  How do you know?

One more test of reality and we’ll call it a day. Congress.  Now, there’s an acid trip if ever there was one.  Is the current impasse a principled defense of the Constitution and of citizen’s rights to small government and a minimal tax of their God-given freedoms and resources?  Or is it an unprincipled assault on the very fabric of our society and our shared well-being in ways that will ultimately negatively redound to us individually, if by indirect and often counter-intuitive paths? Which is the reality? And if neither is the reality in itself, where might it be in some common ground that either or both sides are unwilling to explore?  And if that common ground does not exist, what then?

Heavy stuff.  Do you feel the need for drugs?  Maybe just a little wine? Maybe a couple of glasses?

In an increasingly complex world, reality is becoming less a matter of reconciliation to facts than a matter of perspective. To the degree that we fail as individuals and institutions to see circumstances from more than our preferred perspective, we become more divorced from reality, and more exposed to the risk of failure.

What’s your reality?

Are you sure?