(or, The Importance of Critical Thinking)
There is no doubt that the age of big data is upon us. While most agree we’re in the very early stages of realizing its potential, we are now able to capture and crunch vast amounts of information in order to learn all kinds of things about ourselves and our world.
While listening to a recent episode of the TED Radio Hour podcast on the “Big Data Revolution,” I was reminded of the power of big data and the impact this will continue to have on the way we live our lives. With anything of this scale, there are significant benefits and the potential for danger and misuse, but perhaps the biggest lesson was the reminder that data itself doesn’t do anything.
Data doesn’t create meaning. People do.
The title of this blog would be certain to grab your attention if you saw it as a newspaper headline or magazine cover. And it’s likely easy to uncover data that proves a strong correlation between the consumption of ice cream and incidents of drowning. Of course, correlation does not always lead to causation. With a shallow dive into the details, there’s a much simpler explanation for this phenomenon. Summer. A season where many of us are much more likely to consume ice cream and/or go for a swim.
While somewhat of a goofy example, the fact remains that in order for all this data now available in the world to be used for good, we must improve our ability to think critically and apply meaning carefully. As data analyst Susan Etlinger explains in her TED Talk, “we have the potential to make bad decisions far more quickly, efficiently and with far greater impact than we did in the past.”
This has major implications in the world of investing. With ever growing amounts of data available to anyone investing in anything, there is a rush to make connections which can lead to errors in judgment as to whether correlations are causal or just coincidental. Despite historical evidence and seemingly exponentially growing support behind scientific research of respected economists, Nobel prize winners and financial media experts that there is no benefit to attempting to out play the market, we are hard wired to believe if we work hard enough we can find an edge. Today’s data rich world offers an endless haystack for speculators to search for that elusive needle. And this doesn’t even scratch the surface of the opportunities for unethical behavior in packaging investment products based on loosely researched or heavily manipulated data for profit.
The same holds true, of course, in many, many industries and walks of life. The solution? Etlinger’s suggestion to bypass these potential pitfalls is directing more of our time to the humanities; sociology, rhetoric, philosophy, ethics, etc. Her hypothesis is that adding emphasis in these areas will improve our ability to think critically, spot problems in arguments, and better identify biases and false correlations.
She adds, “something that happens after something doesn’t necessarily mean it happens because of it.”
Avoidance is impossible. This big data world is one we’re going to live in whether we like it or not. Instead, we’ll hopefully be able to enjoy benefits to our health, wealth and general well-being as a result of being able to assess how we live our lives more thoughtfully. The cost will be vigilance and learning to increasingly ask who put the information together and what their motivation is in coming to this conclusion.
In investing and in life, long term optimism mixed with a pinch of doubt continues to be a healthy balance.
Have a great week!