Akin’s Laws of Investment Analysis

Spacecraft design is hard. Akin himself says as much when he puts bluntly, as his 33rd law, “Space is a completely unforgiving environment. If you screw up the engineering somebody dies (and there’s no partial credit because most of the analysis was right ..)“.

We recently came across Akin’s laws for spacecraft design – lessons learnt from decades of space system development followed by decades more of teaching. Reading these laws one can’t help but feel they generalise so easily – replace “design” and “spacecraft” with almost anything and the vast majority of laws apply.

Here is an attempt doing just that for investment analysis, a far safer environment.

  1. Investment analysis is done with numbers. Analysis without numbers is only an opinion.
  2. To get investment analysis right takes an infinite amount of time. This is why it’s a good idea to operate when some things are wrong. 
  3. Investment analysis is an iterative process. The necessary number of iterations is one more than the number you have currently done. This is true at any point in time. 
  4. Your best analysis efforts will end up useless in the final analysis. Learn to live with that disappointment. 
  5. Miller’s law – three points determine a curve. 
  6. In nature, the optimum is almost always in the middle somewhere. Distrust assertions that the optimum is at an extreme point.
  7. Not having all the information you need is never a satisfactory excuse for not starting the analysis.
  8. When in doubt, estimate. In an emergency, guess. But be sure to go back and clean up the mess when the real numbers come along.
  9. Sometimes, the fastest way to get to the end is to throw everything out and start over.
  10. There is never a single right solution. There are always multiple wrong ones, though.
  11. Analysis is based on process. There is no justification for analysing something one bit “better” than the process requirements dictate. 
  12. (Edison’s Law) “Better” is the enemy of “good”.
  13. (Shea’s Law) The ability to improve analysis occurs primarily at the interfaces. This is also the prime location for screwing things up. 
  14. The previous people who did a similar analysis did not have a direct pipeline to the wisdom of the ages. There is therefore no reason to believe their analysis over yours. There is especially no reason to present their analysis as yours.
  15. The fact that an analysis appears in print has no relationship to the likelihood of its being correct.
  16. Past experience is excellent for providing a reality check. Too much reality can doom an otherwise worthwhile investment analysis, though.
  17. The odds are greatly against you being immensely smarter than everyone else in the field. 
  18. A bad piece of investment analysis with a good presentation is doomed eventually. A good piece of analysis with a bad presentation is doomed immediately.
  19. (Larrabee’s Law) Half of everything you hear in a classroom is crap. Education is figuring out which half is which.
  20. When in doubt, document.
  21. (Bowden’s Law) Following a testing failure of your analysis, it’s always possible to refine the analysis to show that you really had negative margins all along.
  22. (Montemerlo’s Law) Don’t do nuthin’ dumb.
  23. (Ranger’s Law) There ain’t no such thing as a free launch.
  24. Mo’s Law of Evolutionary Development) You can’t get to the moon by climbing successively taller trees.
  25. (Roosevelt’s Law of Task Planning) Do what you can, where you are, with what you have.
  26. (de Saint-Exupery’s Law of Design) An analyst knows that they have achieved perfection not when there is nothing left to add, but when there is nothing left to take away.
  27. Any run-of-the-mill analyst can make something which is elegant. A good analyst is efficient. A great analyst is effective.
  28. (Henshaw’s Law) One key to success is establishing clear lines of blame.
  29. (McBryan’s Law) You can’t make it better until you make it work.
  30. You really understand something the third time you see it (or the first time you teach it.)
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