Friday, April 30, 2010

Truth is NOT relative

By Dan Danford
Family Investment Center

Truth is not relative. Several times recently, I’ve been in conversations where someone said that there are “versions of the truth.” They suggest that people can witness an event and walk away with different impressions about what happened.

That is undoubtedly true. Ask seven witnesses about a car accident, and you’ll hear seven unique stories based on different viewpoints, focus, attention, and participation. Each will be nuanced by that viewer’s unique perspective.

Still, that’s not what I’m thinking about. No matter what each witness remembers, there is only one thing that really happened. In a car accident, there is likely hard evidence – skid marks, damaged autos, specific injuries – to document what took place. Despite what anyone remembers, we can tell that the car was traveling at a certain pace because it left 75 feet of rubber on the road. Even if the evidence is misleading or confusing, there is still but one true account of the event.

This is very important. Truth isn’t some amalgamation of all seven stories. When people offer different versions, that doesn’t mean the truth lies halfway in the middle. The truth is what happened. Versions of the truth aren’t the truth. No matter how sincere, well intentioned, or credible the witness, the truth is still the truth.

Versions are a lot like opinions. Everyone is entitled to an opinion, but not all opinions are created equal. Some are passionate, some are informed, and some are self-serving. Some are reasoned and accurate; others are laughable and ridiculous. We might be amused by Paris Hilton’s opinion about the New York Stock Exchange, but most of us aren’t going to bet our retirement on it. Just because she’s entitled to an opinion doesn’t make it accurate or helpful.

There may be ‘two sides to every story’ but that doesn’t mean both sides are equally right! There are two sides to World War II, and two sides to the Proclamation of Emancipation, and – even – two (dubious) sides to the Christian Crusades. Just because someone claims something doesn’t make it true. Or even close to the truth.

People remember different things. They may offer different versions because someone was distracted, or momentarily absent. Or, in the cases of attorneys and politicians, someone gets paid to spin a particular version of the truth. Maybe there are different versions because one person is lying.

As a society, we’ve been trained to be tolerant. We try to listen to everyone. We focus on being open-minded, and acknowledge people’s freedom of expression. We even allow a presumption of innocence when we catch someone red-handed. Versions play a part in all that.

Still, when all is said and done, the truth is the truth.

1 comment:

  1. I think you are right on the money with this. I immediately thought about quarterly consensus earnings estimates. If 10 different analysts follow IBM, then the consistent earnings estimate is the mean of that range of truth/opinion. When IBM reports its actual/true earnings number, then we are treated to commentation on how the truth beat or fell short of expectations. The mean value 10 different versions of expected truth then influences the price of IBM when the true truth is known.

    I don't give much brain space to First Call consensus expectations. Give me a respected, seasoned and INDEPENDENT analysis of risk-adjusted performance - Truth in the Modern Portfolio Theory world. I think that is what makes Morningstar so special, and why it is our go-to source for our investment management team.


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