Statistics (whether about the global economy or about your own sales) play an important role in management. But there’s an enormous body of literature demonstrating that human beings do not have a very good intuitive grasp of stats. Even people with training in statistics are capable of falling prey to various fallacies and cognitive biases. Here’s a useful interview with Prof. David Spiegelhalter about his working helping people understand statistics better.
A Cambridge professor on how to stop being so easily manipulated by misleading statistics
“…We know, for example, that “relative risks” can be used to look impressive. Twice a small number is still a small number. We know that talking in whole numbers—so many people out of 100—is clearer than talking in percentages or decimals. We know if done right, visual representation can often do a better job of explaining numbers, especially to those with low numeracy.
We’ve used this knowledge, worked with psychologists around the world, to build guidelines for how people can best communicate risk. But there are still things that we haven’t got a good answer to. For instance, we know that people think 30 out of 1,000 is bigger than 3 out of 100. We know that we make numbers look bigger by manipulating the denominator. As a statistician, the perception of numbers is new to me. I thought people would know that 3 out of 100 is equal to 3% is equal to 0.03. But they are very different!”…