Numbers are very appealing. They give a sense of comfort – certainty in a rather uncertain world. The numbers I come across every day describe some real-world entity or concept.
7 billion people in the world
365 days in a year
Of course, numbers do matter. But, are numbers sufficient in understanding reality?
I’ve been analyzing numbers for a long time. As an engineer who used to spend hours working in labs, I learned them the hard way. Every number reported from an experiment had a probabilistic range attached to it. The experimental setup was carefully calibrated and double-checked to make sure the numbers were repeatable and reproducible. In the world of science and engineering, numbers have taken us far – quite literally helping us pinpoint the location where a space vehicle would end up on the moon.
But are numbers good enough to describe and understand human systems – economy, businesses, society, markets, or the government? Could you have accurately predicted the fall of Kodak using just numbers? Unlike scientific and engineering phenomenon, there are no laws that exactly govern human behavior or as an economist would call as “bounded rationality” of humans. If that’s the case, then why do we routinely use numbers? A country’s economic progress is proxied based on its GDP growth rate. Organizations measure their own success in terms of revenue or market share.
These questions have made me change the way I look at numbers. Here’s what I have realized –
Numbers describe real world entities, or concepts. Understand them before looking at the numbers.
How many of us truly understand what GDP means? Why is it a good indicator of the economy? What are its downsides? Will an increase in GDP have a direct translation on my next month’s income? This is just one example of a number we routinely come across but don’t think about much.
Is it absolutely clear how the numbers came into being? Explainability matters.
If you knew the sampling procedure behind exit polls conducted by TV channels, you would be less shocked at their appalling track record. The process that generates or measures numbers is critical and quite often overlooked. But it can help explain the downsides of the numbers you see and their reliability.
When using numbers as targets, be very careful for what you wish for
Are grades a good measure of a great education? The more you aim for a single indicator to measure progress, the higher is the chance of it being gamed or abused. The British economist, Charles Goodhart describes this succinctly – “When a measure becomes a target, it ceases to be a good measure.”
Try to measure everything that matters
“If you can’t measure it, you can’t manage it”. Numbers used in the right way can help organizations achieve results and align different business functions. But this is true not just for organizations. If you are preparing for a half marathon, it would serve you well if you measure your weekly progress on a smartwatch.
However, many things that matter can’t be measured. Don’t ignore them
Can you exactly measure how much you love someone or something? Almost all of the characteristics that determine the success of human relationships and systems are hard to quantify.
Number fatigue is real. Don’t go overboard
How many us have seen COVID-19 dashboards put up by various governmental agencies with all possible numbers but still can’t seem to figure out what is really going on? It’s important to keep a problem-first approach when communicating numbers. Think about the audience, the questions that are most pertinent, and the best format to share them to avoid number fatigue.
A single number is not sufficient to understand an entire, complex system
If you are a financial analyst or have tried to invest in stocks by looking at financial ratios, you will relate to this. Can you invest in a stock by looking at just its price or its price-to-earnings ratio? Complex systems are hard to understand or explain using just a single indicator.
Adopt a probabilistic approach to numbers
Unless you’re counting the number of oranges in your fridge, a probabilistic approach to numbers is the right way to go about for most numbers you come across. If I could give one piece of advice to high school students about math then that would be to learn probability before calculus. It’s important to think in terms of frequency, likelihood, and sample sizes. It’s a different mindset as compared to the deterministic world of numbers that is taught in school. However, it resembles reality much more closely.
The story behind the numbers matters the most.
If you remember nothing else, remember this. When numbers Make sure you can tell a story behind the numbers that another human can understand. This is the golden rule and is a great BS detector. If you come across numbers that sound too good to be true, maybe there is something fishy about them.
Yash Tambawala 