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Welcome to Loyalty MagazineLoyalty Magazine reports on customer retention,loyalty schemes, rewards, affinity, CRM, call centre issues, direct and viral marketing, mobile and internet channels for both B2B and B2C enterprises. It covers all global markets and business sectors, including retail, financial services, travel and hotels, telecoms and electronic commerce. |
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Wednesday, 19 May 2010 09:50 |
 Numbers Rule Your World
There were a few things that disappointed me about “Numbers Rule Your World – the hidden influence of probability and statistics on everything you do”.
For a start, it wasn’t really about numbers, but about averages, statistics, assumptions and probability.
Another thing is that it contains very few numbers.
However, the examples author Kaiser Fung gives as to how numbers often provide a skewed view of a situation is sobering.
The thorny subject of credit scores is raised, with the suggestion that because so many different criteria are used for a credit score, it is very easy for it to become inaccurate, which can be deeply damaging to the individual. He also shows how insurance companies were badly burned in Florida after two hurricanes, so powejrful they should only happen every 100 years, happened in two years of earch other, leading to an annual bill for one company of $36bn against the $6bn they had allowed for.
There are also examples of how an e-coli outbreak was traced to spinach, through using data mining and how a teenage boy was wrongly sentenced for a murder after taking a polygraph.
But is this about how numbers rule our lives? I remain to be convinced, even after reading the conclusion which makes the point that averages are very dangerous and assumptions from statistics often wrong.
Probably the most interesting example Kaiser Fung gives is of SAT tests for teenagers in America. Apparently the questions for these are carefully studied and tested to make sure they are fair, with a number of questions in a paper acting as non marked samples to check for bias. What they don’t seem to be able to achieve however, is to get the marks for white and black children to even out. The reason for this, they believe, is because of the language the questions are couched in, written in the main by white middle class, middle aged teachers. He doesn’t give a fix, but at least they realise there is a problem.
In summing up, Fung warns again about the danger of averages. He writes: “In the business world, the popular notion of an annualised growth metric, also called “compound annual growth rate” is born from erasing all year-to-year variations. A company that is expanding at 5% per year every year has the same annualised growth rate as one that is growing at 5% per year on average, but operates in a volatile market so that the actual growth can range from 15% in one year to -10% in another.
Statistical thinking begins with noticing and understanding variability, says Fung, and realising when numbers are being used that could possibly result in some false assumptions.
That is the really interesting point about this book, that such terribly false assumptions can be made that then live with us for a long time.
And you know what they say about statistics.
“Numbers Rule Your World – the hidden influence of probability and statistics on everything you do” by Kaiser Fung, is published by McGraw Hill, price US$22.95 (£15.99).
More info: www.mhprofessional.com |
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Countries in the EU are currently working on their responses to the complex policy proposals suggested for the handling and storage of personal data. The legislative changes currently underway are of critical importance to the loyalty sector. Jeremy Henderson-Ross, legal director and general counsel – EMEA for Aimia suggests companies should play an active part in the discussions.