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1-Page Summary of Naked Statistics
“What’s the Point?”
All kinds of events that involve numbers, such as election predictions and financial investments rely on statistical analysis. People can make more accurate decisions about those if they understand the statistics behind them. Statistics is a useful tool because it helps people combine and analyze different types of data to turn complex information into simple numbers. It’s used in almost every aspect of life, including school grades, sports scores (batting averages), stock prices and much more.
There are many sources of information in today’s world. Netflix, for example, uses data to recommend movies based on the probability that customers will enjoy them. If a lot of people like one movie and most viewers watch another movie next, it is likely that everyone who likes the first movie will also like the second; Netflix then recommends the second movie to customers who liked the first one.
Statistics summarize information and help people make better decisions. This is vital for insurance companies who have to calculate their costs based on how likely certain events are to occur, such as a driver’s likelihood of having an accident or the damage caused by floods in houses.
“Descriptive Statistics”
Learning how to communicate statistical language is important because it can help you make money or lose it. The average, mean and median income in a certain demographic can be significantly different from the others, so that’s something you want to keep in mind when planning for that demographic.
Statistics are important to any company because they can tell you how many products you’re shipping with defects. If your company is sending out a lot of products with small defects, then that’s not so bad. But if the number of serious defects is high, then you need to fix those problems immediately because it will affect sales. Statistics also help us understand numbers by putting them into context; for example, if one figure goes up by 10%, and another goes down by 30%, we get a sense of scale as well as direction (whether things are getting better or worse). They can also be used in indexes which give us an overall view of complex data and allow us to compare different variables more easily. For example, let’s say two Olympic gymnasts have similar skill levels but one gets 9.8 on her performance while the other gets 8.5 – even though she has better skills, she won’t win unless her total score is higher than the first person’s score.
“Deceptive Description”
Don’t trust statistics. Math is exact, but people use math to describe statistical data, which can be misleading and inaccurate. Know where your stats come from so you don’t make a mistake when using them.
Verizon may cover the largest percentage of geographical areas, but AT&T reaches more people since it has more coverage in large population centers.
If a drug extends life expectancy by two weeks, is it worth paying for? Two weeks may not seem like much, but the statistic doesn’t show that 40% of patients were cured. It’s not reflected in the median life expectancy, but it would be reflected in mean life expectancy.
Just because a statistic or ranking is popular doesn’t mean it’s significant. U.S News & World Report publishes college rankings every year, but those rankings are largely based on surveys of professors rather than actual data. Many people believe that Harvard is the best university, so its reputation leads to higher rankings and better reputations for other schools.
“Correlation”
Correlation does not imply causation. There may be a connection between two things that are actually caused by a third thing. A study may show that students who have more TVs at home earn higher SAT scores, but the cause could be better tutors and prep classes provided by their families due to higher income levels.
