My th s of A n a ly t i c s
than seven times after adjusting for inflation. In lockstep, deaths due to heart disease more than halved, making it easy to
conclude that the two are closely related.
Medical care advances are believed to
have contributed to lower heart diseaserelated deaths through improved diagnosis and treatment. However, general
lifestyle and diet changes also played
significant roles. (Read more.) Furthermore, a review of other chronic disease
trends reveals that some medical conditions, such as diabetes, have worsened
(see Figure 1). There’s also myriad other
factors potentially related to escalating
healthcare costs, such as an aging population, greater administrative expenses
and broader marketing pressures.
For another take on how correlations potentially mask deeper relationships, check out Christopher Knittel and
Aaron Smith’s paper “Ethanol Production And Gasoline Prices: A Spurious
Correlation.”
Takeaway: Seriously consider whether correlation truly reflects a relationship
or simply masks the influence of one or
more hidden intervening variables.
4. Random sampling ensures
representation
Unless you’re working with full universe coverage, some form of sampling
is usually required. And while fantastic
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in theory, true randomness is difficult
to achieve. Transactional data are constrained by membership and/or opt-outs;
surveys face non-response; and social
media content is subject to issues related to self-reporting. Beyond sampling,
the challenge of unbiased representation is exacerbated by a number of factors ranging from human predispositions
to herd mentality.
Sinan Aral wrote a convincing piece
in the MIT Sloan Management Review,
for example, explaining the tendency for
online customer reviews to be abnormally j-shaped rather than bell-curved.
Referencing different studies, Aral explains how herd mentality can lead to a
disproportionate concentration of positive ratings skewing online reviews over
short and long terms. (Read more.) It’s
another example of how things aren’t always what they appear to be.
Takeaway: Accurate representation
without some form of post hoc control is
frequently illusive.
5. People are rational
Humans act irrationally. As consumers, we often derive greater satisfaction
from the same item if it costs more (not
less); we let decoy options cause us to
make suboptimal decisions (such as
buying something bigger than we normally would); and we frequently stick
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