Statistical Thinking Versus Intuition

“The rise of statistical thinking does not mean the end of intuition or expertise…Increasingly, decision makers will switch back and forth between their intuitions and data-based decision making. Their intuitions will guide them to ask new questions of the data that non-intuitive number crunchers would miss. And databases will increasingly allow decision makers to test their intuitions–not just once, but on an ongoing basis.” (pp. 195-196)

Humans Are Bad At Making Predictions

“The human mind tends to suffer from a number of well-documented cognitive failings and biases that distort our ability to predict accurately. We tend to give too much weight to unusual events that seem salient…Once we form a mistaken belief about something, we tend to cling to it. As new evidence arrives, we’re likely to discount disconfirming evidence and focus instead on evidence that supports our preexisting beliefs.” (p. 112)

Five Rules for Decision Making with the 80/20 Principle

1. “Not many decisions are very important…Do not agonize over the unimportant decisions and above all don’t conduct expensive and time-consuming analysis…If you can’t, decide which decision has a probability of 51 percent of being correct. If you can’t decide that quickly, toss a coin.”
2. “The most important decisions are often those made only by default.”
3. “Gather 80 percent of the data and perform 80 percent of the relevant analyses in the first 20 percent of the time available, then make a decision 100 percent of the time and act decisively as if you were 100 percent confident that the decision is right.”
4. “If what you have decided isn’t working, change your mind early rather than late.”
5. “When something is working well, double and redouble your bets.”

(pp. 116-117)