Double-Check All the Things People Are Sure They Know

by January 27, 2021
Credit: Pixabay user saulhm

You’d think this would be a given, but too many business stories incorporate information that, while popularly believed, is simply wrong. If you don’t check statements that business experts, academics, and journalists frequently treat as divinely revealed wisdom, you can incorporate gross factual errors in your work.

I first came across this dynamic many years ago. At the time, reporters regularly mentioned how frequently thieves successfully targeted laptops. The statistic mentioned was above 10% (14% comes to mind). I dug around and found that the information, originally from a company selling laptop insurance, couldn’t be verified at all. This turned into an article about how the number was likely bogus and, within a short period, journalists stopped using it.

There was another time I was writing a light non-business feature about the favorite places around Boston of a particular celebrity. He mentioned some details of places that he was absolutely sure were correct and became irate when something else appeared in the story. I had double-checked, including getting the street address of a flower shop he frequented in a part of Cambridge I knew well. (The door was on a small street, but the listed address was on an intersecting one.) The celebrity became irate, but the story had the right information.

This happens regularly. A more recent example is how many people claim that the top five stocks in the S&P 500 make up a quarter of the index’s value. I’ve heard it from academics and market experts alike. Except, when you go through the numbers from S&P, it’s an exaggeration. The concentration is still enormous; the top ten members of the S&P 500 make up about 20% of the value. But accuracy is important. As a side note, even as an index does well overall, a large portion of stocks in it may be losing value. Not mentioning that means creating a false impression that all or at least a significant majority of stocks in the index must be doing well.

Another recent example is the definition of a recession. Talk to economics and market watchers and you’ll often hear that a recession is any period in of at least two consecutive quarters in which there is negative GDP growth.

Once again, wrong, as I noted in an article. There is no simple definition of a recession and the calling of one, by the non-profit National Bureau of Economic Research (NBER), involves significant judgment calls.

The two-quarter negative GDP growth first became popular in 1974 when Bureau of Labor Statistics economist Julian Shiskin had a New York Times op-ed that suggested the framing as rough approximation of what a recession is. That approximation has since become for many an official designation.

When you see people toss numbers or any sort of information about as authoritative statements of fact, do yourself a favor and spend a little time to check. You may end up thankful that you did.