Correlation or cause & effect

Many people confuse between effects and their causes

I read a great anecdote about it in a book called Freakonomics by Steven Levitt - the story was about a study that found a high correlation between the number of books a kid has at home and his performance level at school. In short, the more books the kids had the better he succeeded at school.

No wonder that the education system wanted to invest in a project where it provides every month a new book to all the kids at school. The reason was - if more books means higher success, then we should get the children more books.

It is obvious that people are confused between correlation and cause-effect.

The cause of the success in studies may or may not have anything with the amount of books. Maybe smarter kids tend to read more books? or maybe it has to do with the educational values of the parents at home? Do you really think that if you take a bad student and give him 100 new books he will suddenly become a good student? of course not!

The episode ends when the author explains that in this city someone got his senses back before investing several million of dollars for this misunderstandings.

As a business you must understand cause and effect. If you do not, it will be very difficult to understand why you succeed or why you fail.

When you get success a signal you should be able to understand its cause and enhance it and when you get a failure signal you need to avoid the same mistake again. It is easier said than done though and you must be very careful or next you will be the one with an anecdote like the book-success correlation.


Regards,
Amir