Bloomberg recently profiled a photo series from London-based photographer Travis Hodges entitled “The Quantified Self.” In each set of photos, Hodges captures people and the data they track, including sleep and spending habits, physical and social activity, health and happiness metrics. Almost every subject shares how quantifying and tracking have brought tangible positive changes to well-being.
- Since Suran’s uncle died of a heart attack, he gets a 3D body scan each month to measure and record seventeen circumference measures. Because significant belly fat predicts heart disease better than most metrics, the 3D scan demonstrates to Suran that he’s keeping up with his dietary and swimming goals.
- Rosa worried she was spending too much each month, and even feared that someone might have found a way to steal from her bank account. After tracking all of her debits, she soon realized it was her “going out” spending that was robbing her financial well-being. Rosa reports going out less these days but enjoying herself much more, because each outing is now a special occasion.
- Rachel always dragged herself out of bed each morning before she got the sleep cycle app. Rather than waking her at the same time each day, the app wakes her during the moment of a half-hour preset window when she’s sleeping the lightest. Additionally, Rachel tells the app each night what kind of day she’s had, and it constructs a dataset to let her know how each type of day affects sleep (e.g. exercising that day increases her sleep quality by 10%, while drinking alcohol decreases it by 7%).
- Barbara’s family created an app designed to track and influence overall happiness, targeting specific areas like health and fitness, friends and family, finance and career development. In addition to tracking her own goals effectively, she can see all other family members’ priorities and assist in their attainment as well.
Here at Chatham, we love the idea of using data intelligently to promote better health, financial, relational, and personal development outcomes. Naturally, we couldn’t resist developing a few applications so that our clients could achieve greater organizational effectiveness through data:
(1) Vital statistics: Each day, we measure and record debt and derivative valuations for our clients, including providing credit valuation adjustments on a monthly basis to arrive at accounting-prescribed fair values. By logging into our website, clients see total mark-to-market on their derivatives by bank counterparty, as well as browse applicable collateral thresholds or accounting designations. Best of all, no one has to step into a 3D scanner!
(2) Transparency: Following well-publicized FX scandals in which financial counterparties contractually committed to quality execution actually provided worst execution, we’ve been asked by certain clients to measure execution quality on their “costless” volume FX spot trades. Injecting transparency into the discussion of FX trading helps companies understand how much they are yielding to counterparties on a per-transaction and aggregate basis. Tracking and quantifying these costs helps prevent that nagging feeling of being robbed in stealth.
(3) What-if: Clients frequently wonder: What would happen if EUR-USD went to parity? How much would my interest expense change if rates rose 100 basis points? How much collateral would I need to post on my jet fuel hedges if the price went to $1.25? Understanding the behavior of exposures and hedges in shock scenarios is vitally important to making the right hedge structuring decisions. And once the suitable hedging decision is made, we’ll all sleep better at night, especially if we’ve also exercised and avoided lots of alcohol.
(4) Overall well-being: Effective risk management may begin with measuring the present state, understanding express and hidden costs, and considering all what-if scenarios, but it certainly doesn’t end there. In fact, optimal risk management asks far deeper questions: Are we getting the most out of our hedge accounting capacity at every entity level? Have we taken into account natural offsets and correlations among exposures when deciding what, and how much, to hedge? Does our hedging policy fit with our overall business strategy? Are we fully compliant with all regulatory requirements across the world?
If the proliferation of data tracking has a meaningful critique, it may be this quote (often misattributed to Einstein, but likely from sociologist William Bruce Cameron instead): “Not everything that can be counted counts, and not everything that counts can be counted.” It’s easy to get buried under a mountain of data and not focus on the right measurable and non-measurable questions. For best results, give us a call to discuss what really counts for your organization, so that we can track it, quantify it, and draw actionable conclusions together from it.