Beware of spurious correlations

Human beings are wired to look for ‘meaning’, which makes us eager to spot connections that sometimes simply aren’t there. That’s never been truer than in today’s era of ‘big data’.

Tyler Vigen is a criminology student at Harvard who set up his own website to highlight how easy it can be to draw ludicrous conclusions from data because of the way we’re taught to look for patterns.

Vigen has loaded up a number of different sets of random data on his site and then cross-related them to identify apparent (but clearly nonsensical) statistical similarities. For example, as you can see above, there seems to be a clear link between the divorce rate in Maine and the per capita consumption of margarine in the US.

Similarly, you might say there was a link between the per capita consumption of cheese and the number of people who died by becoming tangled in their bedsheets:

chart (1)

Clearly, there isn’t really a link in either case. But it’s easy to imagine that people might accept there was – and unnerving to realise how readily we accept this kind of correlation when presented to justify a medical or scientific or commercial conclusion.

Vigen calls them ‘spurious correlations’. You can find many more examples (and even create your own) by visiting www.tylervigen.com. It’s quite amusing.

Alternatively, you could look a little harder at some of the ‘facts’ that get used in presentations around your own business and see how many of them actually stand up to robust statistical scrutiny.

Not so amusing, but potentially more revealing.

 

What’s the one big thing?

Imagine you’re lost in Africa with a small group of people. You don’t know where you are, or which direction you should head. You’ve got no food, no water, no transport. And there’s a hippo coming towards you.

What do you do?

The answer is: you get out of the way of the hippo. Hippos are vicious; they kill three thousand people a year in Africa.

That’s not to say the other problems aren’t serious problems. They are – and you’re going to have to deal with them. But the hippo is the one big thing you have to deal with now because, if you don’t, you’ll die.

You know that because you’re smart.

But let’s imagine, for a moment, that you’re not so smart and you don’t realise quite how dangerous the hippo is. Maybe it’s just lumbering towards you in an apparently amiable way. Maybe you remember the BBC2 idents with the adorable baby hippos shot from underneath as they swim in slow motion.

So you and your companions ignore the hippo and start focusing on your other problems. We need clean water, someone says. If we don’t find something to drink in two days, we’ll die. That’s bad, right? Everyone nods and starts looking for water containers.

Then someone else points out that, actually, water isn’t your biggest problem. Your chances of surviving as long as two days in the African bush are so slight that it’s much more important to figure out where you are and find a way out. If you don’t, you might die in much less than two days. So you forget the water containers and start planning escape routes.

And, while you’re doing that, Harry the hippo comes round the corner and tramples you all to death.

That’s what happens to businesses all over the world every day. They get so caught up in their day-to-day problems that they miss the one big thing that’s going to kill them.

50 years ago, that wasn’t such a problem. According to strategy agency Innosight, a business listed in the S&P500 index in 1965 could expect to stay there for 33 years on average. By 2026, the average tenure will be just 14 years. In other words, things are moving faster. It’s getting harder to survive.

That’s why, if you’re a business leader, your first and most important job is to provide focus.

What’s the one big thing you need to get right? The biggest threat? The opportunity you can’t afford to miss? Make sure everyone is absolutely clear about it.

Because, if you don’t, the hippo will get you.