Analytical Techniques: Don’t Overreact to Single Data Points

Last Thursday, the Los Angeles Times ran an op-ed piece by Scientology leader Miscavige’s consigliere, tax lawyer Monique (“Blinky”) Yingling.  In it, she rebuts a Times op-ed piece that ran back in November that made a case for revoking Scientology’s tax exemption.

We analyze this message — the content, the timing, the larger context of interest in the tax exemption, and we make an emotionally unsatisfying but intellectually honest decision in processing it.

Step 1: Analyze the Content

The arguments on either side are nothing new.  Mike Rinder, in a blog post Monday, did a fine job analyzing the rhetoric, and for the purposes of this discussion, we will link to it rather than doing our own.

Content of Yingling’s reply:  Of course, the first step in analyzing a document is to compare it to previous, similar documents to see if the message suggests that the target has changed its mind about something. Does the message hint at a new strategy or tactics that the target is using to achieve its goals?  Is the target doing something you haven’t seen before?  If so, why might they be doing it, and how can you assess the odds of success for this?

When assessing the driver for a target departing from their previous behavior, it can be a new strategy or it can be a reaction to events that the writer is trying to contain. Importantly, when you assess that a new message is in reaction to an event that you haven’t seen, you can often deduce a lot about the event that your opponent is reacting to, even if you can’t substantiate the existence of that event yourself.  Knowing your target from long observation can lead you to guess surprisingly accurately in many cases.

For example, when Paul Haggis sued Haley Breest in December for blackmail, you could predict in the wake of the avalanche of sexual harassment accusations leveled against Hollywood figures, that one or more accusations against Haggis were in the pipeline.  That happened.

Yingling’s editorial contained all the usual elements of a Scientology PR denial: ad hominem attacks on the author, claims of respectability, unsupported assertions, omissions of key facts, etc.  The style of the argument is unremarkable, and while some of the details are new, they’re not sufficiently interesting to warrant a detailed dissection.

Content of the original editorial: Jeff Augustine, over at the Scientology Money Project, has done an impressive amount of digging and laying out the numerous ways in which Scientology has breached the 1993 agreement that gave it tax-free status. So the assertion in the original op-ed that Scientology breached the agreement has been out there with documentation for several years.  The original piece broke no new ground. We conclude, then, that this was merely an attempt to bring an existing message to a new audience.

Step 2: Analyze the Traffic

The second step in analyzing these editorials is what intelligence pros call “traffic analysis.” Even if you can’t read a message, perhaps due to encryption, understanding who’s sending and who’s receiving the message, and other information about how the message is being transported (via radio, hidden in an Instagram photo via steganography, via carrier pigeon, etc.) can tell you a lot.

In this case, the most interesting thing is that Yingling’s piece is emerging almost 3 months after the original editorial.  That seems significant. In a real company, an editorial sharply criticizing the company in the nation’s second biggest media market would typically result in an immediate response from the organization targeted.

There could be any number of reasons why Yingling’s response took three months to appear.  It could easily be that David Miscavige’s famous micro-management style held up approval of Yingling’s response, or it could be any of a number of other prosaic factors.  It’s important not to assume that the circumstances around the message (the timing being the most notable in this case) are extraordinarily meaningful without sufficient specific information to justify that conclusion.

Step 3: Analyze the Context

After understanding the “traffic” pattern around the message, you have to consider the larger context. Why would Scientology write the editorial?

Obviously, the revocation of Scientology’s tax exemption would be a major impact on the cult, but probably a much bigger impact on its members, who could be hit with large tax bills for their payments to the COS.

And Scientology officials are probably concerned about the issue coming to the fore in the wake of comments in November 2017 by a longtime Trump family aide who’s a minor Administration official that Trump believes the exemption should be revoked.  We assessed that this is not likely to take place because of the overall climate. We believe that Lynne Patton, who made the comment, was probably exaggerating the discussion that took place, if any actually did, in order to boost her image with Leah Remini, who she told of this.

A secondary bit of context to understand is the petition circulated on by Jeff Augustine to call on the government to investigate the tax exemption. It now has nearly 20,000 signatures, far more than a similar petition in August 2017 to get A&E to cancel Leah’s “Scientology the Aftermath” show.  That latter petition was heavily promoted to cult members in social media and mailings, yet it received about 1/3 of the signatures that Augustine’s petition did.  So it is possible that the cult understands their social media momentum is not sufficient to change the course of social media interest by critics and the public at large for revoking the exemption.

It’s important to understand that these circumstances aren’t new.  They aren’t sufficient to spark the appearance of a single editorial months after the above scenario was established.  And it is thus important not to assess that the cult has become more defensive and more worried about the tax issue based on this single data point.

  • Step 4 (The Hardest Step): Decide to Do Nothing

Essentially, one of the postulates of Euclidean geometry (the stuff you study in high school) is that it takes two points to define a specific line.  And, of course, there’s a lot more stuff in statistics about fitting a line to a collection of data points.  And all of it depends on having more than one data point.  But in this exercise, one data point is all we have.

So that leads us to do something that is intellectually required, but emotionally difficult: we note the data point, look for more data points to spot a trend (which, as good analysts, we were already doing), but take no further action.

This is exactly what more experienced hunters do.  Newbies want to race into the forest, blast away at anything that moves, and bring home the kill as fast as possible.  Experienced hunters wait patiently and do it right.  They ultimately bring home more beef than the “ready, fire, aim” approach.

Background: Our Current Opinion on the Tax Exemption Issue

Our current opinion on the tax exemption issue is unchanged:

  • Scientology has materially breached the terms of the 1993 agreement, and has done it consistently and willfully since its signing.  That raises the argument that the cult entered into the agreement fraudulently; they didn’t adhere to the agreement for a long time then suddenly start violating the terms. The possibility is high that Scientology thus engaged in fraud ab initio, as Jeff Augustine has suggested (and ably documented), exposing the cult to larger penalties, and potentially to criminal sanctions.
  • While the IRS commissioner could overturn the tax exemption easily, the resultant litigation costs as the COS inevitably appeals, could easily consume a significant fraction of the IRS’s litigation budget, which we once estimated at around $150 million based on a reading of a federal budget several years ago.  The IRS is unlikely to devote a sizable percentage of its existing budget to a single case, and it is unlikely to get any supplemental funds for anything in the current political environment, even something as worthy as suing Scientology.
  • The uptick in discussion among the broad public about revoking the tax exemption is a testament to the success of those activists who have long labored to bring the cult’s abuses to light.  However, we assess that it has not yet reached critical mass to overcome the inertia in the above point about the IRS budget.
  • The consequences of lifting the tax exemption will not be fatal to Scientology. We estimate total reserves at somewhere between $1.5 billion and $2.0 billion.  It would easily be able to pay a substantial bill for back taxes, interest and penalties.  Even if members adjusted their giving downwards to reflect the tax burden they’d have to pay on future donations, we believe the cult remains profitable on an operating basis and any capital investments such as funding Ideal Orgs where donations don’t cover the costs, are not material to their finances.  There would be internal PR issues, as the “IRS victory” is perhaps the single biggest achievement of David Miscavige’s tenure at the helm, so overturning that could result in member disaffection. But that wouldn’t likely be fatal.
  • We have insufficient facts to form an informed opinion on whether the IRS would move for criminal penalties against the organization or any individuals associated with it in the event that it were to move against Scientology.

Author: John P.

John P. is a Wall Street money manager and IT technologist fascinated by irrationality in all its forms, and Scientology most of all. He's a lifelong Steely Dan fan.