by Anand Halve

The new age overwhelms us with numbers. And Nandan Nilekani is soon going to give each of us a unique one that we can call our own! Numbers crowd our life.
Consider a businessperson: he is expected to know ROCE, EPS, EBITDA, and other numbers that encapsulate the health of his business.
A business journalist has to be au fait with stockmarket indices, the WPI, changes in GDP and so on.

Mr Average Kumar keeps track of his Net worth, his CTC, his credit card limit, etc.
Even the nymphet concerned with her nymphaliciousness has to keep track of calories consumed, weight, Body Mass Index, and how close she is to the magical ‘size zero.’
This fascination with the quantified view of civilisation, is not surprisingly, a recurring motif in advertising and media too.

And yet, I am amazed at the number of people who flaunt their number-numbness as a badge, drawing a spurious association between quantitative illiteracy (innumeracy) and creativity (“I’m an art person you know, I just can’t understand numbers” is supposed to convey that being numerically challenged is automatic proof of genius in the artistic field!)

I suspect it is this proud innumeracy that allows the widespread misuse and abuse of numbers and statistics.
The most common culprit is probably the “misleading multiplier.” Shampoos that make your hair “two times stronger”, products that are “50% more effective” and so on. No one asks: ‘compared to what?’

The answer if you look hard and have a microscope handy, is available in a caveat at the bottom of the TV screen.

The arithmetic though, gets positively mind-boggling when the numbers move from ‘more’ to ‘less’. As in hair-fall preventive products that leave “five times less hair” on the comb. What is “five times less”?! If there were 10 hair on the comb earlier, and now there are only 2, is that “five times less”? (10 divided by 2). That would be 80% less … on the other hand “five times” equals 500% … one is left scratching one’s head (no doubt causing “three times” more hair fall!)

Journalists lost for words
Less excusable are journalists who report survey findings, blissfully unaware that surveys are based on a sample. And that critical to interpreting the findings of a survey is the definition of the sample.
Recent newspaper articles cheerfully celebrated the extent to which the internet has penetrated the circulatory system of 12-18 year old school children, as shown in a survey about internet usage, conducted by a technology company. However the articles left me with more questions than answers.
- Were the students in the survey representative of ALL school students? From which schools were they picked?
- Were these students those who had computers at home? With 24-hour internet access at home?
- Did the other aspects of their profile match those of the total student community? (Eg their parents’ income, education and profession?)
I wrote to the journalists seeking clarifications. I haven’t heard from them.

Time lapse and other lapses
Another example: The recency effect in advertising posits that more recent exposure is recalled better. But surely, temporal amnesia is dangerous in understanding business?
Here are Interbrand’s valuations in billion USD, of three of the ‘World’s most valuable brands’ in 2008 (changes from 2007 year in brackets)

Coke: 2008 value: 66.7 ( plus 2%)

IBM: 2008 value: 59.0 (plus 3%)

GE: 2008 value: 53.1 (plus 3%)

They apear to have done about equally well. However, see how your inference about these brands would change if we compared the 2008 numbers with the 2003 numbers, rather than only for 2007.

Coke: minus 5.3%; IBM: plus 14%; GE: plus 26%

Not quite so equal are they? And surely understanding business requires a better perspective than one’s view of films, where you forget last year’s hits in favour of last week’s releases?

But unless people begin to believe that it is important to understand numbers, what they reveal - and equally, their limitations - they will continue to be taken in by “false numerology.” And one-third of the world will continue to have no idea about what the other 56% think!