June 24, 2017

Statistics and intuition: how to make decisions

November 12, 2013    PracticeРаспечатать эту статью

Statistics and intuition: how to make decisions

The disadvantage of most start-ups is too optimistic in planning future development.

Can I make decisions , relying on intuition ? According to recent studies , when making decisions play a significant role emotions and from time to time, these emotions can help in decision making – while fighting fires , surgery , or in the choice of the artist to the gallery. But always rely on intuition is very dangerous for beginners in business , as it can lead to the collapse of their business .

The fear of losing something interferes with something to gain

Daniel Kahneman , a Nobel Prize , in his book “Thinking fast and slow ” describes how the intuition : that which intellectual methods used by the people and how the mind processes information , creates connections and forms conclusions. It is these relationships that we believe true, often lead to failure.

In one of his works of Daniel Kahneman and his colleague Amos Tversky argues that because of the fears that are inherent in the human brain , any loss becomes more important than the possible acquisition. As a result, most of the people rather than be guided by mathematical calculations to determine their chances , refuse to submit to them an opportunity. According to studies, when the importance of the event was defined as 95% of people rated it an average of 79.3 %. At what people often overstate the possibility of events , almost unbelievable , and were willing to pay a premium just to protect yourself from them.

Errors in Statistics

Many people make the mistake of relying on statistical data collected by examples of small forms. Kahneman in his work gives it the name “mystique of small numbers ,” explaining that the errors in the statistics occur much more frequently in the calculation of the common parts . For example, according to U.S. government studies , the students significantly smaller schools do well in school compared to their peers who are enrolled in large schools. But were later carried out more in-depth studies that refute the previous findings.

You can test yourself by answering the question: In which hospital is more likely that one particular day the light will be more than 60% of the boys – to the hospital, where every day 15 children are born , or the one where the light appears 45 children? A similar study conducted journal Science. The correct answer is – more chances in the hospital , where every day fewer children , as in the one where they were born more , averaging effect is much higher.

lessons of success

However, talking about the statistics should not be when people do not take it at all. According to official data, in the USA, the main drawback of most start-ups is too optimistic in planning the future of the company, even when statistics belies this optimism . Restaurants open where some had already been closed . Project managers rarely take into account the data on the same project opened in the past , because each of them is sure in their uniqueness.

Thus , people have resorted to generalize in those cases where it is not needed . Statistical concept of regression to the mean number is a phenomenon where improbable events are equal to the average indicators. Luck abruptly ceases to accompany people , poor results are getting better , and good – worse . People tend to attach much greater importance to accidents than they deserve. Analysts are beginning to learn of the unexpected success , look for the causes of success and make predictions for the future, not taking into account the fact that the statistics for single indicators always contains such a term as ” outliers “.

What follow

As proved by researcher Philip Tetlock , long-term forecasts compiled by experts tended to be worse than random selection . Experts are analyzing the current situation , for example, the head of the company ‘s strengths , or performance of the management team , but to predict the company’s performance in the future they can not. They use only the facts , to replenish their own assumptions. According to Tetlock , the only difference between them and ordinary people lies only in the fact that the former are more confident in the accuracy of their forecasts and are always prepared to justify the mistakes committed earlier in forecasting.

So what is to be guided in making decisions ? Of course, you need to take into account all : stats, previous experience and external data . However, to get involved in the facts and figures is not worth it , because it can lead to collapse. Jonah Lehrer in his book “The Moment of solutions ,” says that as soon as the human brain becomes full of information , it begins to rely on intuition rather than logic

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