When you understand basic statistics, some things in life start to make a little more sense.
Here are 10 ideas from statistics that I have found useful:
- Variability is a natural part of life. Not everything in life follows a predictable pattern. It’s essential to be prepared for unexpected outcomes.
- Correlation does not imply causation. Just because two things appear to be related doesn’t mean one caused the other.
- Overgeneralization is easy and dangerous. Many bad decisions and outcomes are a result of making broad claims about an entire population based on a small or non-representative sample.
- Small probabilities do not imply impossibility. Even if something is statistically improbable, it is still possible. Life’s rare events, both good and bad, can and do happen.
- Events with a tiny probability can happen if given enough opportunities. This is a reminder to be consistent and keep trying to achieve your goals because many small efforts can result in success over time.
- Probabilities can be conditional. The probability that something will happen can change depending on the conditions or events that precede it. You may be able to increase or decrease the likelihood of your desired outcome by creating conditions favorable to that outcome.
- Regression to the mean implies that extreme events are often followed by more typical ones. Exceptional successes and failures are often temporary. Over time, things are likely to balance out. Your recent stock market windfall does not mean that you’re a trading genius.
- Perception often differs from reality. Humans are notoriously bad at intuitively understanding probabilities. For example, many people overestimate the likelihood of a rare event (like a plane crash) while underestimating more common risks (like car accidents).
- Patterns and trends tend to emerge only after long periods of time. There is value in being patient and taking a long-term perspective, especially if things do not initially go as you expect.
- Randomness plays a larger role in life than you may think. Not everything that happens has a deep reason or cause. Some events are genuinely random. Recognizing the role of chance in your life may help you empathize with others and avoid bad decisions due to overconfidence.