This is the third of a series of posts that I try to lay down the most relevant lessons from the book Psychology of Intelligence Analysis by Richard Heuer.
I believe this one topic, perspective or better yet, peripheral vision, to be one of the trickiest to analysts. It’s easy to literally get lost as research per se is simply never-ending. “Data collection” pitfall might play a big role in security analysis.
Perspective or Peripheral Vision
- “By studying similar phenomena in many countries, one can generate and evaluate hypotheses concerning root causes that may not even be considered by an analyst who is dealing only with the logic of a single situation.”
- There are many possible market segmentation exercises that possibly yield interesting questions, such as geographic, demographic, social, ethnic, economic, political, etc. The concept of horizontality here is introduced in the business environment analysis. Conclusions are dangerous since causality is difficult to fathom;
- “Historical analysis often precede, rather than follow, a careful analysis of the situation. The most productive use of comparative analysis is to suggest hypotheses and to highlight differences, not to draw conclusions.”
- Verticality: understanding how a specific firm and its sector weathered prior crises and demand peaks are great expectation calibrators. A little history coupled with sector-specific operational know-how satisfy analysis from this particular angle;
- “When faced with an analytical problem, people are either unable or simply do not take the time to identify the full range of potential answers.”
- Combining horizontality & verticality, with a little luck and a sharp mind, you can have a holistic view of the subject company. After spending a good time imagining possible scenarios and their impact in the key value drivers, you are likely set to have a investment-case-oriented research project;
Additionally, mind PR/IR company departments exist for a couple of reasons. One of them is to be the regular communication channel with investors. Also, a crucial part of their job description is storytelling. That’s the story the company tells investors during meetings with investors. Beware if one does not own the framework, one becomes susceptible to whatever story he is told.
The bottom line is extensive sweeping for comparisons propels better questioning, thus enabling one to ask sharper questions and to ponder new possibilities that previously weren’t even considered. To do that, peripheral vision is required.