More Watermelons — Understanding Assumptions in Statistics and Business

There is a story about a farmer who decided to start selling watermelons to make extra money. He bought a whole truckload of the fruits and sold them in one day. At the end of the day, he had a net loss of $100. The farmer thought to himself and decided that tomorrow he would buy two truckloads of watermelons…

Indiana State Police photo via NWTimes

2 Wrongs = ?
Amusing–but more importantly, this story vividly illustrates an important concept. Many times our intuition fails us when we fail to comprehend basic assumptions at the foundation of an issue. In this example, the business leader made an assumption that a certain volume would result in a certain profit. Thus he concluded that to increase profits required increasing volume. The fundamental assumption was false: the initial volume did NOT result in profits.

The bottom line is that leaders MUST be aware of the point from which subordinates and team members started a journey of logic. Statistics and aerospace engineering and flight test are full of assumptions.  Human Factors, which is featured in some videos and references in the weeks ahead, is a field of study replete with examples of this.

This month, this weekly column will introduce several examples that illustrate this very important and yet somewhat difficult concept, one that I call 2 Wrongs = 1 Right (you can download it now to get a head start on the content). This idea permeates every one of the ATOMs, and it will confound us when we look at pictures, chart a course, or apply ATOMs in general.

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Where Do We Go From Here

How do we find our way then, when we are exploring the unknown, blazing a trail into uncharted territory? How do we apply elementary statistical principles to transform uncertainty into decisive action? What is to prevent us from making a preposterous application of ATOMs when we deal with very complex situations, those in which our intuition fails?

These questions are not much different from those faced by Chuck Yeager before he ever broke the sound barrier or Neil Armstrong as he took that first step on the moon. Neither of these men, nor anyone around them–with hundreds or thousands of highly educated, very scientific people on these teams–knew what to expect. Or did they…?

ATOMs is a monthly column that introduces analytical tools of mathematics and statistics and illustrates their application. To read more about ATOMs, you can read Where Do We Go From Here, or view the online workbook here.

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