With the current COVID-19 health crisis creating an environment full of uncertainty, it is telling that the Australian government is depending on science and data to inform critical decision-making. Even before the challenges of a global pandemic, our world was infinitely complex. So much so, that any system that helps to understand the world around us is valuable.

This is also true of EG’s investment and development world, where we follow the data to inform our investment strategies and property development. And there is good reason for this.

The human brain has an incredible capacity to deal with complex issues. So much so that we favour the complex hypothesis over the simple. This is referred to as a complexity bias and it is an inherent logical fallacy because we usually associate complexity with highly valued traits such as expertise and intelligence. But just because we have the capacity for complexity doesn’t mean we owe it undue credence. The true expert and the highly intelligent will strive for simplicity.

While I am on the subject of inherent human biases, there are a couple of others to consider: confirmation bias (anecdotes that suit your hypothesis) and recency bias (it worked last time and therefore it will work this time).

At EG, it is our belief that data-driven investment cuts though these human shortcomings and delivers more certainty.  For the last 15 years, EG has developed their in-house data driven investment strategies through their PRISMS® risk management software.  By using data effectively, efficiently and consistently we distil the complex into simply understood data sets.  By analysing apparently random factors, we are able to carefully predict what the future might look like.  Risk and uncertainty can be measured and priced in.

Since our decision-making is innately flawed and prone to error, it is logical that the fewer decisions that are left to humans, the better.  It is a blow to the ego to learn that algorithms are more likely to make better decisions than humans in 50% of the time and in the other half of the time, make the same decision as a human. But ultimately, the data will only help to improve our understanding of the world’s complexities and simplicities.