1.4 How do you reason with numbers? - Video Tutorials & Practice Problems

<v ->All right.</v> So I promised you that even if you were math phobic you could learn how to reason with numbers. And so let's do a little bit of reasoning. Let's see what some of the reasoning is that you have to do. You just have to be a little bit logical, just kind of put your thoughts together. And one of the big concepts that you need to understand is the idea of correlation versus causation. So correlation means that two numbers seem to change together. So they seem to track each other. So for example, maybe number of visits to the website that might track with number of conversions. Because if your conversion rate is fairly steady, then if you get more people to the website you're gonna get maybe about the same percentage more people converting. So that would be things that correlate with each other. But you don't necessarily know whether they cause each other. Now in this case it makes sense, that if you get more people to the website that might cause more conversions. So then this one really is causation, but sometimes it's just correlation. And let me give you an example. So do you know which page on your website is most highly correlated with conversion? You might think to yourself, yeah, that's probably the best page on the site, that's a really good page. Well, I can tell you the answer, and I don't even know what your website is. The page on your website most correlated with conversion is your thank you page. The page shown after someone converts. So it might be the page shown after they checked out of the shopping cart, or after they filled out the email contact form. Whatever your conversion is, the page that comes next after they hit that submit button, that is the page most correlated with conversion on your website. Now, do any of you actually think that that page caused conversion? No, you don't. You don't, and I know that's a silly example, but it really illustrates the point that you need to use your human judgment to really decide if something is causing something else, or if it's merely correlated with something else. And so that's where you need to really come into play and you need to reason about the numbers. So you need to use your knowledge of marketing, your knowledge of customer experience, your knowledge of whatever the problem is that you're working on to decide if something is truly causal or whether it's merely correlated. You cannot just let correlation drive your decisions. You have to really think deeply about what's causing what. Because there's all sorts of examples of spurious correlation. So here's one that shows that the divorce rate in Maine is 99% correlated with the consumption of margarine. And so do you really think that people getting divorced eat more margarine, or that margarine causes divorce? No, this is just a spurious correlation, the numbers just happen to line up. And so you need to use your judgment to decide when something is correlated and when it is really causal, because your analytics system will spit out correlations all day long. And if you just randomly start following them to make decisions without really thinking about it you're gonna fall into a trap. That's what happens when you do not reason about numbers. And so the reasoning with numbers is actually the most important thing that you need to do. And everyone can do that, not just math whizzes. And so let's look at what the three basic math reasoning concepts are. The first one is aggregation. Basically summing things up, totaling things. And so the computer will do that for you. You don't need to do it. The computer will add up how many visitors you had to your website in a month. The computer will add up how many emails were sent up. That's aggregation. The second thing is something you need to do called segmenting. So instead of just looking at those grand totals, those aggregate numbers, you wanna actually split them up. You wanna segment your numbers, you wanna split them up. So for example, if you're saying, hey, this is the total number of people that came to the site. Well, how about if you split it up between new visitors and returning visitors and you segmented by that. And that would tell you a little more than if you just said, here's the total number of people that comes to the site. The next thing you do is compare them. So you could compare those segments. So maybe you would compare new visitors versus the same period from last month or last year. And so you aggregate things, you segment them and then you compare. This is how you reason with numbers. These are the only skills that you really need. And now the computer is gonna aggregate things for you. You are gonna decide what the important segments are, how are you gonna divide up those numbers? And then the computer can compare them once you decide what you want to compare them against. And so you'll be using the computer as a tool for your mathematical reasoning. And everyone can reason with numbers, not just a math whiz, and yeah, I mean you.