Briefing: Spreadsheet Eeyores versus Tigger-ish storytellers

It must have been a grim day for every flamboyant insurance broker when Mircosoft Excel and the dreaded spreadsheet first appeared in 1985.

Until then, I’d imagine there was at least a respectable delay before disappointing results became apparent.

I’m envisaging some old Dickensian meanie poring over his ledgers with a quill, unemotional but refreshingly inefficient. And while they beavered away, there was plenty of time for a decent lunch and the necessary fortification to prepare a convincing explanation, or new narrative, for decidedly unconvincing results. 

Excel removed much of that breathing space – and upended the industry in doing so.

Its arrival was particularly well timed to haunt me personally. It appeared the year after I was born, giving it sufficient time to mature into the horrifyingly obtrusive presence it would later become in my life – and continually in my career. I’ll likely never know freedom from its clutches.

Unfortunately, you can’t really argue with a spreadsheet.

The columns are either black or red – positive or negative. You can summon all the broker bullshit available about pipeline, sentiment, timing and the promise of jam tomorrow, but the number sits there on the screen, staring back with the cold authority of an emotionless, joyless zealot.

And yet there is a wider, almost perennial battle taking place between the quantitative and the qualitative.

You can pick your own analogy, but as a Star Wars geek I naturally think of the Sith versus the Jedi – with no prizes for guessing which side of the spreadsheet debate I consider the light.

The Jedi emphasise the need for balance in the Force, while the spreadsheet Sith are less accommodating.

For them, numbers possess primacy and everything else is merely chatter. The model has spoken, discussion is over – there is no balance, only zero-sum reality.

An insurance utopia

The difficulty of that spreadsheet-centric approach is that insurance has never operated in such a pristine world.

Even though it’s an industry that quite literally is based on the law of large numbers, if numbers were everything, sentiment would have no value, narrative would be defunct, moral hazard could be perfectly quantified and every risk would be written at precisely the correct technical premium.

Profits would follow with the regularity of the tides.

Oh, how people have tried that route… or rather tried it on.

Oh, how they have peddled alchemy in the form of superior “segmentation” and “data analysis”. Oh, how it sounds like more broker BS wrapped up in some technical, supposedly quantifiable jargon.

And whilst the law of large numbers cannot be outrun indefinitely, neither can it fully explain the behaviour of an industry still governed by hard and soft markets, sudden rushes of capacity, bouts of collective nervousness and the occasional appearance of some bright new underwriting idea that everyone piles into like a ravenous Billy Bunter approaching an unattended buffet.

Wizened underwriters understand this, of course. A technical premium is essential, but the real magic lies in knowing what to avoid, when to bend and who to trust.

These are softer judgements, developed through experience, supported by an ability to recognise when something doesn’t quite smell right and the inevitable scar tissue built up when you get it wrong – which we all do at some point.

Ease off the quantitative?

Even artificial intelligence (AI), supposedly the ultimate triumph of quantitative logic, appears to recognise the importance of narrative.

AI companies have reportedly been acquiring vast quantities of old books to feed their models, including obscure works that most living humans had long forgotten. Apparently, the machine needs Victorian travelogues and the like, which there is something rather wonderful about.

In its pursuit of precise answers, AI has discovered that it needs stories. The machine requires context, language, ambiguity and perhaps even the accumulated oddness of human thought. My take is that even this most logical of inventions cannot live by numbers alone.

The same applies to businesses. Were personality and sentiment irrelevant, founders or key personnel could leave following an acquisition without consequence to the acquirer. The spreadsheets representing the books of business would remain and renewal retention would continue precisely as forecast. After all, they usually make no account of humans save for full-time employee wage as a cell input.

And whilst the founder may have left the data behind, their clients often discover that what they valued was the judgement, energy and relationships attached to the person. Accountants may previously have assigned little worth to such ethereal ingredients, until they walk out of the front door and the numbers on the spreadsheet start to flash red.

Balance is therefore required, as it always has been. Financial and statistical underwriting discipline are key determinants of success and anyone who ignores the figures will eventually be introduced to them in a much less friendly setting.

But I fear the growing primacy afforded to spreadsheets, alongside the determination to remove trained humans from more of the product and service chain, risks stripping the industry of precisely those qualities that make it adaptive.

All those traits the best brokers exhibit – persuasion, judgement, creativity and the ability to tell a compelling story – are not, for me at least, decorative extras.

They are part of how opportunities are recognised and, ultimately, how trust is built – they are the qualitative guardians.

Happily, this leaves the field open for the Tigger-ish characters. Those with stories in their blood, creative juices still flowing and the confidence to ignore the most joyless spreadsheet Eeyores will continue to find opportunities. Markets, after all, are made by people, not cells.

Let’s remember then that the spreadsheet was supposed to become the servant, not the master. Yet many of our lives are now dictated by that irritating green icon.

That is why my twitchy finger still hovers instinctively over the blue Word icon instead.  It feels a far safer place – and certainly a more hopeful one.