True Lies

Goodhart warned that a measure decays once people start aiming at it.

Most measures get a quiet spell first. A legal rule gets none - it is written for people who are paid to aim, and starts the day it is published.

Legalese is full of cut-offs. They are not statements about the world. So they are immune from being called wrong. On the contrary, calling one wrong would flatter it.

Exactness Is Not Accuracy

Not to single out the legal world: financial analysts, tax consultants, et al. work with cut-offs.

₹100 crore, 182 days, 51%, four percent forever. Exact numbers pointing at nothing truthful.

We keep mistaking exactness for accuracy. Two companies alike in every way that matters end up on opposite sides of a line. The line, the artificial construct, is the only difference between them.

Advisers work the line because the line is the only thing with a sharp edge. That is sensible. But it is also where the muddle starts. The line is real; what it claims to separate is not separated.

Someone becomes a different kind of resident on day 183. Control arrives at 51%. But honestly nothing underneath has moved.

The Wheel That Turns Nothing

Wittgenstein’s test: a wheel you can turn while nothing else in the machine moves is not part of the machine.

Yet whole professions turn that wheel expertly.

Financial analysts do the same with the growth rate, and with less excuse, since no law forced the decimal on them. Change the terminal growth rate from 2% to 1% and two-thirds of a company’s value is at the mercy of a single cell on your spreadsheet.

Worse, spend two hours debating that with a fellow professional - and you have spent more effort on the model, not understanding the business.

The care is genuine and the professional intensity is infectious.

But such endeavours grip nothing of the truth. It is like polishing ice: the smoother you get it the less there is to stand on.

Everyone Opens a Box and Says Value

Fair valuation runs the same way. Everyone opens a box, says “value”, and the word matches across the room. What is actually inside each box does no work whatsoever. The shared move is the whole of the content; the real worth underneath never enters - not because it is hidden, but because nothing in the practice ever turns on it.

The accountants admit this themselves. IFRS 13 calls these inputs “unobservable”. So what really matters is “unobservable”. And then the standard files the admission as a disclosure note.

Lines Have to Exist. That Is Not the Mistake.

I have the luxury to pontificate on philosophical lines. But a judge must rule, an auditor must sign, a committee must land on some number by Friday. Institutions do not signal truth through silence - they just call out the aberrant ones.

They build a boundary and let the boundary do the deciding - and the deciding is written up afterwards as a finding. The mistake is never the line. Lines are needed as arguments need to end somewhere.

The mistake is reading a way of ending an argument as a description of the world, then defending the number as though something had been found rather than chosen.