The Misuse of Data Is Still a Use of Data!

Sunday, December 7, 2014

We live in a very analytic society. We have more computing power on our cell phones than was used to land a man on the moon. Every purchase we make, every web site we surf, every email we send - it's all put into giant databases. Numbers are crunched, predictions are made, futures are determined.

Rarely do we ask if we're using those numbers properly. I'm not talking ethics here. I'm talking pure usefulness of the results being generated.

tarot cards help make predictions
Image courtesy of Wikipedia

The data from Black Friday is out, and I read a very interesting quote from the CEO of the National Retail Federation, the world's largest retail trade association.

His team crunched the numbers and found that Black Friday sales were down by 11%, compared to last year. On first glance I immediately assumed that this was a bad sign for the economy. After all, if people don't have money, they're going to spend less on luxury goods like Christmas presents.

NRF CEO Matt Shay disagrees. He stated that the reduction in spending was actually a sign of an improving economy where "people don't feel the same psychological need to rush out and get the great deal that weekend."

Now let's just stop for a minute and examine this conclusion. There are basically two possibilities for Black Friday sales numbers:

(Well, odds of two years having the exact same sales numbers are infinitesimally small.)

If lower sales are good for the economy, would that mean that higher sales are bad for the economy?

The answer must be yes, if we assume that the data has any significance at all. Otherwise, every possible outcome would be positive for the economy and Black Friday sales numbers would become meaningless data instead of useful information.

Many would suspect that the CEO of a trade organization would spin analyses to put the future prosperity of his constituents in the best light. That being said, if a person's conclusions do not rely upon the data being analyzed, he might as well save himself the trouble of collecting data in the first place. He's not providing a careful analysis, but merely spin.

Would you like to learn how to understand the world so that you can price your products appropriately? Then check out my book on how to price software, or contact me for a private consultation.