Category: Analytics

People do things for reasons.

The reasons are the benefits you get – the things you have gained, are gaining or expect to gain from taking a particular action.

All these reasons and benefits, the associated hopes, dreams, goals, objective, prizes, are packaged by economists into one, rather dull word – utility.

Utility is what’s in it for you.

Understanding how utility is created is crucial when trying to make a decision, or when getting someone else to make a decision.

One way of doing this is by drawing a utility tree.

For example, around this time of year, many families are thinking about options. They want their kids to go to a good school – but what should they do?

Say they have to move – and they have two options. They can buy a place or rent a place. If they buy, they can buy a big house or a small house. If they rent, they can settle for an OK house.

Whether they buy or rent, as long as the house is in the right area, they are fine for schools – so the outcome is the same in all cases.

What makes the difference when choosing between the options for this family?

Lets say one partner wants a big house. The other, more familiar with their finances, doesn’t want the associated costs because they will stretch them too much.

A smaller house would make one partner happy, and the other could deal with it – but it’s not a preferred option by any means.

Both of them, however, really don’t want to rent again and deal with the issues of agents, commissions and having to have regular inspections.

These reasons are the utilities associated with the situation.

Now, if you keep all this in your head, it’s really hard to have a mature discussion that doesn’t end up in an argument.

Instead, drawing a utility tree helps to make the options, outcomes and utilities involved clearer.

The key thing is to consider each option you have by itself, using the same criteria to evaluate each option and making sure that you look at it from enough points of view to be happy you have thought through it properly.

For example, seeing the tree in the picture above clarifies the situation more than describing each person’s point of view in words.

The point of view someone takes, their perspective, is crucial in being able to understand what will and what won’t move them.

We can often only see things from our point of view.

Making good choices, however, whether in personal situations, when making investments or when persuading someone else to make one, often need you to see things from another person’s perspective.

What this also means, quite often, is that the best solution will need to be a compromise. For example, you might be able to persuade your partner to have a smaller house, as long as you can also have a nicer car.

Understanding utility simply means that you can better understand what people want and what they will do – and that means you are more likely to get what you want as well.

How do you set things up so that you can get results?

Take an example that many people have to deal with – meeting sales targets for their business unit.

The results are expressed in monetary terms – you want to add X in sales by the end of the year, so what does that break down into by month, by week and by day – depending on how the business you are in makes its money.

If you are in a retail business, with transactions happening every day, then a daily system of monitoring profit and loss may be enough to tell you whether you are in or out of the money. Depending on how far away you are from target, then you can take action to change things.

In this case you are in a business where results can be measured in great detail, so you simply monitor the end of the process.

But what if you operate in a different kind of business – say you sell large and complex systems – power stations, for example, or provide ad-hoc consulting services. The results in such businesses expressed in financial terms may not be as predictable.

So what happens then?

The markets and analysts like companies with smooth lines trending upwards. They don’t like surprises or lumpiness in results. So, the companies give them what they want – managing their reporting so that you get the effect of a smooth line, even if the underlying business is lumpy.

This takes you from monitoring results to manipulating results.

The logical thing to do might be to consider the other end of the process.

If the results are hard to predict – you still need to do something every day to get them.

You need to pick up the phone, engage with someone, create something – the daily activity is what eventually produces those results.

Is it possible that measuring aspects of daily activity that correlate with results can help get results better than measuring the results themselves?

In other words, measured daily activity could lead to results which can then be measured in financial terms.

The point is this – in order to track how you are doing, you need to measure and monitor something every day.

There is no point in measuring something daily that does not lend itself to being broken down into a daily measure.

Instead, find something that you can measure daily that correlates with the result and measure that instead.

Post-truth was chosen as the Word of the Year in 2016 by Oxford Dictionaries because it seemed to describe the essence of what happened during BREXIT and the US Presidential election.

People have always cherry-picked – selecting the data or evidence that supports their point of view while discounting or ignoring other information.

The thing that is changing, however, is that in a continuum between what is false and what is true, we are getting much better at using falsehoods to manipulate how people think and respond to messages – and the politicians are the ones doing this best.

For example, which news headlines grab your attention?

The best ones create a visceral, emotional response. Facts are dull. Feelings make you sit up and take notice.

From the £350 million for the NHS claim that Boris Johnson recently repeated to the belief that former U.S President Barack Obama wasn’t born in the U.S, statements that create feelings can ripple through societies, magnified by 24-hour news and social media.

But that’s ok, some people might say. There is no truth, as such. Facts have a lifespan – in science, especially, what we think we know is constantly being overturned by new discoveries and through the application of new technology.

What we have are the facts of the moment – and opinions – and what we do is combine these to create a social understanding of the here and now. Everything is relative and needs to be understood in context. It’s contingent.

The only time we learn really what is true and what is not is when we look back. History tells us how facts were used and what happened as a result.

In real-time, we only have “alternative facts”.

So what do you do about the facts around you? There are two options.

If you want to peddle facts, there are three kinds of people you will face.

1. Those that agree with you.
2. Those on the fence.
3. Those that disagree with you.

You will never get those that disagree to change their minds. The ones that agree with you are already on your side.

Your messages need to speak directly to those who agree with you to make sure that their existing points of view are energized and inflamed – and try to win over those people on the fence.

This is why Trump’s style is so powerful. He speaks directly to his followers through Twitter, and the messages that filter out through the media bring some people to his camp, and he ignores everyone else. And he gets results as a result.

If you are a consumer of facts, there is only one approach you can take – caveat lector.

Reader, beware.

It’s hard to be certain of much these days.

Most people look for evidence to support a particular point of view and we usually find such evidence in journal papers, articles and authoritative websites.

The internet, in particular, lets us link to sources of information quickly and easily – giving us an impression of robust research underpinning our conclusions.

But, there are Woozles out there.

In A.A Milne’s book Winnie-the-Pooh, Pooh and Piglet start to follow tracks in the snow, believing that they are on the trail of a Woozle.

They keep going and the tracks keep increasing, until Christopher Robin eventually finds them and explains they have been, in fact, following their own tracks round and round a tree.

The Woozle effect in social science is used to describe a problem that happens when publications cite other publications that don’t have evidence, misleading people into believing that there is proof out there for a point of view – and turn suppositions into facts.

For example, there is the long held myth that 93% of communication is non-verbal.

This has been taken to mean that you don’t really need to know anything about your topic, but as long as you are personable and charming and know how to read and influence body language, you’ll do well. But it’s based on a flawed interpretation of the research.

This effect can influence many lines of research, from human trafficking, violence in society, anxiety levels and so on. You can even find circular citations, where one citation cites another, which in turn cites the first one.

This effect is perhaps even more important with the way in which the news media and the internet helps ideas to flow and multiply.

The viral way in which an idea can now spread means that it is almost impossible to counteract an incorrect version of a story.

For example, apparently the U.S President was nearly hoaxed by a doctored Time Magazine that predicted an ice age in the 1970s. The story is still floating about on the internet, however.

So how do you deal with a world full of Woozles?

One approach is shut out the nonsense – retreat into a world of austere contemplation, cut out the news, ignore the internet and only get your evidence from high-quality, peer reviewed journals.

The other is to fight Woozles with Woozles, which leads to the Heffalump Conjecture, an approach apparently taken by the people that run our countries.

“Politicians, independent of ideology, in the presence of multiple verified facts and one Woozle will seek to fund Woozle related activity where either Woozle or funded activity emotively leads to increased votes and tenure in office.”