Sunday, September 14, 2008

Success Tools: Statistics Tsunami

What do baseball, technical analysis, web-based marketing, politics, medicine, and matchmaking have in common? A lot of profitable businesses based on statistics.

The more statistics we gather, the less reality lies to us. The more we know about which strategies win and which strategies don't, the more we can we can focus our business and personal efforts on the truth.

This focus can a apply to a million-person cohort of teenage consumers, or your own sequential blood lipid readings.

There's nothing wrong with a "gut " feeling. It's a start. it's an inspiration. A hypothesis. But to take results to the bank, start generating the numbers.

But, "anything can be proved with statistics", right? Well, consider that statistics are going to "lie" a lot less when your own prosperity, health, retirement, etc. is on the line. Are you going to cook your own data? Do you want to lie to yourself about what products (from your own company) are selling? What your blood pressure is? What you've been consuming for lunch?

This revolution is occurring because of faster, more powerful computers. Also because of the ease of collecting electronic information: almost all data generated today is generated digitally. It starts digital, and stays digital. Stock prices, mouse clicks, sports stats, Amazon purchases, survey results, etc. All of the data is already in the perfect form to be digested by statisticians and theorists. Not only is your laboratiory super-sophisticated, you have, in essence, an unending supply of experimental subjects

Does that mean the market for originality and creativity is dead? Hardly. The world will always need creative ideas, breakthrough concepts. The good news is that it will be a lot easier to verify those hunches, not just in raw numbers, but with the many tests and measures of validity that statisticians have developed over the years. The behavior you see at your own local mall, that funny feeling you get when you eat the wrong food...all of this can now be checked by huge banks of data. If your hunch is right, the value of that hunch is multiplied a millionfold. if wrong? There's always room for more hunches.

And what about the un-obvious? The non-blockbuster? Now, instead of being tossed aside, your Long Tail product may be far more marketable than in previous generations. Statistics is not just for megahits. Perhaps your soap dish appeals to married woodcutters over 40 but only after the Equinox. You can test for that. Perhaps socks with "Z" in the third letter might all go up on the full moon. Pull up the data and backtest it.

Statistics is going to continually reinvent itself as a powerful tool in all of our lives. We will be learning more about our world, ur neighbors, and ourselves, than ever before...and we are going to profit mightily from it.

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