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Financial Truth

According to epistemology, a branch of philosophy, knowledge is where three parameters, namely belief, truth and justification, intersect. Belief is about ideas, opinions or assumptions about the world; truth links such belief to a corresponding reality and facts; and justification is the factual rationalization of that true belief.

A belief that is not supported by facts does not represent knowledge for obvious reasons; a facts-based belief does not represent knowledge if the holder of that true belief cannot explain what facts supports the belief. Indeed, he or she may just be making a correct guess when expressing a belief. Hence, knowledge can be defined as a ‘justified true belief’, a sound basis for decision-making.

The existence of Snopes, PolitiFacts, and, when it comes to political biases, Media Bias Factcheck, epitomize the challenges faced by decision-makers when seeking to acquire knowledge nowadays. In this post-truth era, fake truth directly leads to fake knowledge when strong beliefs look for an effortless path to justification.

Judicial courts have long been used to these constraints. Observable facts available to judges and juries tend to be limited. While establishing the truth is the paramount objective of any investigation into a criminal matter, judgments rely on knowledge derived to a large extent from assumptions and their argumentation, i.e. from beliefs and their justification. Decisions end up being based on a so-called ‘judicial truth’ i.e. ‘a summary of facts and circumstances that the court can establish through evidence legally administrated in the trial proceedings’ noting that ‘[this] truth is always artificial, being the result of a selection of facts as perceived by others.’

Even scientists have their limitations. Whereas it is generally understood that a ‘scientific truth’ established through research is robust, the events of 2020 demonstrate that this belief is not perfectly anchored in facts and can be readily abused.

Truth is and always will be relative. To paraphrase Plato and his paradox, the only absolute truth is that there is no truth.

What can be said about business decisions? This is where the concept of ‘financial truth’ can be introduced. Associated with financial assumptions and logic, a financial truth creates a basis of financial knowledge upon which leadership teams can rely when considering strategic or operational initiatives. If derived from thorough due diligence and analysis, this financial truth, even if relative, represents an appropriate basis for decision-making.

The financial truth perhaps, but still the whole truth and nothing but the truth.

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