Have you ever made a bad deci­sion? One that cost you more than you would like to remem­ber? Some­thing as sim­ple as a graph could have saved you from the frus­tra­tion and pain!

Most busi­ness own­ers use some type of fore­cast­ing mod­el to help them make deci­sions that will affect the future of their busi­ness.  Too often, they rely on sta­t­ic finan­cial state­ments and sta­tis­ti­cal aver­ages to guide their way and as a result miss out on oppor­tu­ni­ties to grow their busi­ness. Or worse, they fail to see road­blocks that neg­a­tive­ly impact their bot­tom line and hin­der their capac­i­ty to sus­tain in a com­pet­i­tive mar­ket­place.  So the ques­tion is, which fore­cast­ing mod­el pro­vides busi­ness own­ers an accu­rate pic­ture of the future to help them make con­fi­dent busi­ness deci­sions?

The answer lies in the human brain and how it process­es and under­stands prob­a­bilis­tic data.  Accord­ing to a recent Har­vard Busi­ness Review Blog by Justin Fox, there is empir­i­cal proof that “we tend to under­stand prob­a­bilis­tic infor­ma­tion bet­ter when it is pre­sent­ed in visu­al form than if we’re just shown the num­bers.”  Fox came to this con­clu­sion after review­ing Emre Soy­er, Ph.D in eco­nom­ics and deci­sion mak­ing at the Uni­ver­si­tat Pom­peu Fab­ra in Barcelona, and his pro­fes­sor Robin Hogarth’s paper, “The illu­sion of pre­dictabil­i­ty:  How regres­sion sta­tis­tics mis­lead experts.”

Here is a break­down of Soy­er and Hogarth’s study:

  1. 257 econ­o­mists were pre­sent­ed with a regres­sion analy­sis that relat­ed inde­pen­dent vari­able X to depen­dent vari­able Y
  2. The econ­o­mists had to answer ques­tions about the prob­a­bil­i­ties of var­i­ous out­comes
  3. When the results were pre­sent­ed as numer­i­cal aver­ages the econ­o­mists did a poor job of answer­ing the ques­tions
  4.  When the results were pre­sent­ed as numer­i­cal results and scat­ter graphs of the same data they did slight­ly bet­ter
  5. When the results were shown only in graphs they got most of the answers right.

So, what does this tell us?  Even the experts need graphs! And, a pic­ture real­ly is worth 10,000 num­bers. Our brains are much bet­ter at pre­dict­ing rela­tion­ships between vari­ables when data is pre­sent­ed in graphs. 

We didn’t need this study to know that graphs are the way to go.  But, it’s nice to have a recent aca­d­e­m­ic ref­er­ence to sup­port our approach. Pros­per­i­ty INC fos­ters growth in busi­ness­es and one of our tools for suc­cess is to dis­play data in graph­i­cal for­mat to help busi­ness own­ers make con­fi­dent and accu­rate deci­sions. If you would like to see your busi­ness in a new light please call us today to learn more about Pros­per­i­ty INC.