Data Analysis and Stats

A common theme across MBA programs is exposure to and at least basic skills in, statistical analysis. The value of this can’t be understated, if you’re already working as a quant or did significant amounts of stats in your undergrad you’re not going to be exposed to many new concepts here but for those that haven’t done a lot, this can be a real eye opener. I noticed it particularly with friends that came from the more qualitative industries, marketing or legal, they all highlight that this is where their industries are headed. Gone are the days when a marketer could say “give me a product and I’ll sell it to everyone”, the industry is driven by analysis: what defines a segment in your industry; what is their willingness to pay; how price price sensitive are they? No one is going to invest in your campaign unless you can demonstrate what you expect to achieve and how you are going to measure the results and the answer to both of those needs to be statistically rigorous.

At MBS I did two primarily statistics based subjects (a core data analysis subject and an elective on market research) which, content-wise, can effectively both be split into two parts. Firstly you have the number crunching component: how do you run a regression, how do you test for correlation? The second (and in my opinion far more relevant component for managers) part is what questions do you ask and what you do with the results? Understanding the mechanics behind how data analysis works is handy but lets face it, most people don’t enjoy crunching numbers. I’m convinced there’s something behavioral in there that links back to primary and secondary school and the finality of either getting the right or the wrong answer that pushes people away. I see why there needs to be a component of this in the course but even as an engineer, I’m rarely going to do this kind of analysis myself, I’m going to hire someone who does it professionally and let them do the math. Where an MBA grad can add value is in the interpretation.

I’ve learned that interpretation of statistics is a dark art, far more qualitative than you would expect and, like anything where subjectivity is involved, this sets up a system that can be manipulated by those with the will to do so. Nowhere is this more evident than in media polls; read through a newspaper and look for the headline that screams “Labor drops 2% in two party preferred rankings” then look for the fine print. What was the sample size, how was selection controlled for uneven distribution of voting preferences, what’s the standard error? Unless it’s backed up by rigorous analysis, a headline like that is at best crap and at worst outright misleading. Print media in Australia still plays a major role in shaping public opinion in Australia but its that kind of reader manipulation that destroys the trust of the public when the realize that they’ve been had, the problem is, without an understanding of how statistics works, people miss the deception.

I was talking about this with a friend and he pointed me to a TED talk by Arthur Benjamin where he suggests that the problem is that we’re teaching maths wrong. He argues that the progression we have in schools at the moment (arithmetic -> algebra -> calculus) is going in the wrong direction. Calculus is great, as an engineer or a physicist it’s fundamental to our professions but for 90% of the population, it’s completely irrelevant but statistics (and the associated field of probability) is something that we use every day of our lives. I won’t steal his thunder, it’s only 3 minutes long and like most TED presentations, it’ll leave you thinking.

But back to the value that a stats course adds to an MBA… One of the things that an MBA does really nicely is combine the general knowledge and some big picture perspectives with the specialist insights that you have from your experience prior to the MBA. The ability to look at the micro and macro levels of things is one of the core skills that an MBA pushes you to develop and statistics knowledge helps you ask the right question, get more valuable insights when you interpret information and understand the difference between opinion and something that’s statistically significant. You may not have the best maths skills in the class but that doesn’t matter, being able to understand how the information is relevant and how you can use that information is what is important. Some schools understand this difference and finding one that does will help you have more than a primary/secondary, right/wrong  experience. Looking back, it’s one of the key things I would look for (content wise) in an MBA program.

Where do you get your education from?

A brief aside: we’re at week 9 in the term which is when group assignments and case studies are either due or right around the corner so rather than talking about marketing, I thought I might switch topics and jump onto something a little more meta. I’ve been thinking about this for a while, since my undergrad actually, and while it’s not a ground breaking concept it’s something that sometimes gets lost, particularly when you hit the business end of term.

What I am alluding to is the education you get outside of the classroom. Like when a professor is happy to stick around after class and give you some of their time to discuss where things are headed in their field. Then there’s your classmates and the clubs you get involved with and the friends you make through the socializing you do outside of your study. This might seem really obvious but for me, it’s a critical component of the educational experience.

When I did my undergrad in engineering at Deakin, I didn’t really know what I was signing up for. I did it because I had pretty good grades in my maths and science based subjects and I enjoyed pulling things apart. I didn’t have a specific interest in cars, or electronics, or robotics but once I got into the course and was surrounded by people that were, it started to rub off. I became an engineer by osmosis: someone would build a trebuchet in class out of stuff in the room; someone would test the compressive strength of a brick. With other engineers we explored dogfighting with remote control planes, sumo robots, lazercut mechanical calculating systems and trying to get a set of robot legs to self balance. All of this stuff was done outside the classroom, outside of the formal learning environment but it was as influential on me as the stuff I was supposed to be learning.

A lot of my friends are in first-child territory and one of the topics that crops up regularly is nature vs. nurture. There’s a whole body of work out there expounding both sides but most people agree that it’s a combination of both that makes someone into who they are. Taking that a little further, I can understand how parents are the primary influencers throughout the infant stage but the moment that your kids start to socialize, there is suddenly whole new set of variables in the nurture equation. As we get older we have more opportunity to influence the environment that we’re spending our time in: we choose the sports we like, we hang around people who we share an interest, because we can connect with those people and it’s easy than maintaining a relationship with people who lack that commonality but like anything, as you focus in, you lose some of that ability to generalize.

And that’s what so great about B-school. Granted, there are a lot of engineers around but you’ll start hanging out with finance guys, quants who are avid stockmarket chartists or amateur economists who discuss things like what’s going to happen as the owners of negatively geared investment properties (predominately baby-boomers) stop working and don’t need to offset so much income anymore? Suddenly a whole bunch of pathways that you’ve shut off, reappear, you see what others do and enjoy and they enter the sphere of your awareness.

There’s clearly some other factors in this: how willing you are to interact with others, how many people there are for you to interact with and that is why class size and cohort/intake size makes for such an interesting discussion: too small and there’s not variety; too large and you have a hard time being heard. And that varies for everyone too, an extrovert might be comfortable interacting and contributing in a class with 80 people but an introverted international student, who’s first language isn’t English, may need a much smaller class size to make things work. If you’re considering an MBA, this is something that’s important, ask yourself honestly about the environment you’re going to need to have to be able to learn effectively. It doesn’t matter how great the name of the school is or who their alumni include, if you aren’t learning, participating and contributing then you’re not getting the education you deserve.

To sum up, I think one of the key factors when considering whether or not to do an MBA is the people who will be doing it along side you because they are the single biggest factor in the environment that you’re in. Surround yourself with people who have achieved and you’re are going to get a lot more out of it. I have been made feel welcome at MBS, and not just because people see a chance to meet someone as a networking opportunity but because the people I am studying with understand the intrinsic value of access a diverse group of people tied by a common thread. An MBA gives you an opportunity to widen out your professional field of vision again. It’s one of the few times that you can work back towards being more of a generalist (if you want) and that’s pretty amazing. Most business schools are going to be able to deliver on the classroom component (to a greater or lesser degree) but it’s your classmates who are going to complement and extend that experience for you and looking around at the people I’m going through this with, I feel like I made the right choice.