The Power of Data

By John Metzger

I’ve recently read a book titled, “ Thinking, Fast and Slow. The author is Daniel Kahneman, a Professor of Psychology at Princeton University and a 2002 Nobel Prize recipient in Economic Sciences, for his theory on decision-making. I thought his theories were very interesting and important to understand for any businessperson.

Professor Kahneman defines, for this purpose; the mind working is two ways, which he calls simply System 1 and System 2. System 1 is our intuitive mode where we jump to a conclusion and sometimes react emotionally. System 2 is when we are more reflective by analyzing data and taking more time to reach a conclusion.

The book gives many examples to make the point that quick thinking about something that seems obvious may, in fact be incorrect. Here’s a brief example. Try to figure out if the conclusion follows from the premise.

All roses are flowers.
Some flowers fade quickly.
Therefore some roses fade quickly.

Many people seeing this will agree that it makes sense to reach the conclusion that the roses will fade quickly. However the author points out that it is not that obvious because the example doesn’t state that there are roses in the sample population of flowers. More thought and questioning would be necessary to reach a more accurate conclusion.

Now how does this relate to your everyday business life? Well, some of the things that you do or think may not be the best things for your business. Do you really understand your customer’s wants and needs? How are you making key decisions? Are you making them on instinct or on some form of objective data?

What I took away from this book is that data is almost always the best way to reach a conclusion. My suggestion, to you, is collect as much information as you can when trying to offer a product or service. The easiest way to do this is just ask as many of your customers and friends what they think about your product or service. This is not the best way, but at least it gives you some data to consider. Better techniques are focus groups and surveys.

The net message here is that a little investment in time and money will in most cases produce better results. Taking the time to think more thoroughly through a task pays off. There’s an old saying that,” There’s never enough time to do something right, but always enough time to do it over.”

John Metzger is President of GPSG Consulting
Email: jmetzger@gpsginc.com
Phone: 203-438-6444