There are many similarities between journalists and merchant underwriters. Particularly in their pursuit of what Pulitzer prize-winning journalist Carl Bernstein refers to as “the best obtainable version of the truth”.
In his keynote speech at RiskConnect 2018, Bernstein described the process of getting to this truth. It involves connecting the dots, following the money and the lies, taking a body of information and then putting it together to try and interpret what it means.
This picture “enables you, or me as a reporter, to understand what is perhaps a grey area — and what is very apparent and not so grey — and to use our judgement, our perseverance and our principles to present a report,” said Bernstein.
“It’s a simple concept the best obtainable version of the truth yet, I think as you know, it’s something very difficult to get right, because of the enormous amount of effort, thinking, persistence that is required.”
Turning data into insight
Journalists and underwriters work with limited indicators, but potentially vast amounts of data. Sometimes it’s hard to spot the signals for all the noise and turn data into insight.
“A lot of the data I have comes from interviewing people. It’s a great advantage to sit across from somebody and listen to them. My experience is that if you give people the opportunity to tell their story as they see it, the overwhelming majority of them will tell you the truth. Certainly, the truth as they see it, if you don’t go in with an accusatory attitude. Find out the facts. Let people tell their tale.”
Journalists as underwriters have to be wary of false testimonies. When doing due diligence on merchants, underwriters can encounter unknown companies, those with no business activity or who lack normal expenses. Some are shell companies, registered in opaque jurisdictions or with no clear connection to the country.
The currency of truth is also slowly being eroded by so-called ‘fake news’. This was Collins Dictionaries word of the year in 2017, after a 365% rise in usage since 2016. It is defined as “false, often sensational, information disseminated under the guise of news reporting”. Fake news can be manufactured by politicians, intelligence agencies and unscrupulous merchants. It is done unto us.
Yet it is also something we do to ourselves with cognitive bias. “We have to remove whatever blinders or ideological baggage we bring to the table,” warned Bernstein. “People today are looking for information to reinforce what they already believe, to buttress the ideological, religious, cultural and political values and prejudices that they already hold, rather than the best obtainable version of the truth. That is a huge shift in our culture,” he said.
Balancing time, cost and quality
Journalists as underwriters face the familiar barriers of time, cost and quality. Both professions are on the front line in protecting their organisations from risk. Journalists work against the clock and competitors for exclusive stories to attract readers and advertisers. Similarly, acquirers and payment service providers (PSPs) are under pressure to board merchants quickly to begin earning revenue.
In both journalism and merchant underwriting, being right is better than being first. However, balancing time, cost and quality is not easy. High costs may wipe out low margins. Underwriters may not have direct contact with merchants in another country. Just as journalists may not have direct contact with their sources. Both may lack resources to conduct an in-person audit or interview.
The best obtainable version of the truth is also to some extent only as good as the journalist or underwriter and the sum of their experience, judgement and tools. No-one is perfect. Everyone makes mistakes. How and how quickly we learn from them matters.
“When we make mistakes, we have to own up to them, particularly in what I do — but I would think in what you do as well. Some people are going to get through the cracks. Some people are going to fool us. Sometimes we are going to make errors. But if we are going to have real credibility, I don’t think we can pretend to omniscience,” said Bernstein.
One of the reasons that President Trump’s cry of ‘fake news’ has had such resonance is that sometimes we are not humble enough to acknowledge our mistakes. We also do a process that is not perfect, thinks Bernstein. He was speaking about his own profession, but the same applies to merchant underwriters.
Context is king
Due diligence is important for both journalists and merchant underwriters. Bernstein spoke of how the press failed to use the methodology of investigative reporting during the Kennedy era. It left an incomplete picture of John F Kennedy, the man and his presidency, which only emerged decades later.
There is an extent to which people and events can only be judged in retrospect. Or as the Danish philosopher Kierkgaard said, life can only be understood backwards but must be lived forwards. This highlights the importance of context but also of monitoring.
The best obtainable version of the truth is partly about context. Too much information that we present is without context, argued Bernstein. Context is an essential element of the truth. Your judgement is based in part on the context of all the risk data that you are evaluating. “Simple facts by themselves are not the truth, especially in isolation from the bigger picture,” he said.
The pursuit of the best obtainable version of the truth is an iterative process. It should include in-built check-backs to challenge assumptions and criticise one’s own reasoning. This is why ongoing monitoring is so important in merchant underwriting. It is a second, third and ongoing chance to check that the risk was assessed correctly the first time.
The truth is not a one-and-done activity for merchant underwriters. As circumstances change in your business, your merchant’s business or in the ecosystem generally, ongoing monitoring is a way to manage your risk and make any adjustments as necessary. The same is true with the practice of journalism.
Bernstein has been using the phrase “the best obtainable version of the truth” for decades. “I think it encapsulates what we want to do as reporters and what you want to do, because it’s not always possible to come to absolute truth,” he said. “Truth is complex. Truth has all kinds of factors. It’s not always, or even usually, black and white. But the best obtainable version of the truth, that’s our objective.”
Each year RiskConnect seeks to present new angles and perspectives on the risk ecosystem to the professionals working in it. This year, we have taken the opportunity to invite not one, but two Pulitzer Prize winning investigative journalists: Frederik Obermaier and Bastian Obermayer of Panama Papers’ fame. If you want to hear more on the intersection of underwriting, risk management, money laundering and investigative journalism, join us at RiskConnect on 19-20 November 2019 in Warsaw, Poland. For more information and to register, visit https://www.riskconnect.eu.