Sunél’s Blog | How confident should you be now?

Correlation does not equal causation. Confusing the two is a basic error in critical thinking. For example, if there is a declining trend of COVID-19 infections in Italy at the same time that more people are wearing masks, it does not mean that the declining trend was caused by the mask-wearing.

But let’s first backtrack to what each term means.  Correlation is a statistical measure that indicates the extent to which two or more variables fluctuate together.  Causation is the capacity of one variable to influence the other.


Proving causation is difficult. In fact, proving correlation is not easy either. Both require complicated statistical tests performed on carefully controlled data sets.

So those Facebook posts, Tweets and newspaper articles proving peoples’ points of view often only prove ignorance about statistics and critical thinking in uncertain times. No one knows enough about COVID-19 to be confident about the various aspects of the virus or policies concerning it. 

Further, proof is not conclusively determined by one expert, one study, one country’s experience or even most of these. And even if there is proof of correlation it doesn’t prove causation.  My point here then is not about mask wearing, (please do wear your mask!), or even causation and correlation with regard to COVID-19 trends.  It is rather about highlighting the difficulty of establishing proof that it is beneficial.  The difficulty of proving theories and then translating them into policies or actions. 

This difficulty is true for most fields. Those who are the real experts are often those who sound self-doubting. They are familiar with the nuances and complexities of their subject field. Whereas those who are shouting loudest, confident about their way, should be regarded with suspicion. Their opinions are often far from expert.   As we learn more about COVID-19 and as we emerge from lockdown, it will become increasingly difficult to navigate our learnings.  To differentiate between causation and correlation.  But it is essential that we do because it often determines what we think we know about the world and influences the decisions we make that are based on what we know.

In the money world, it is no different. No one has experience in dealing with anything like this. Never have markets declined so fast and governments thrown so much at a disaster. This is not 1929. Governments have reacted this time by supporting financial markets, unlike more than a hundred years ago. It may perhaps be enough to offset a long, drawn-out recession, if not here, then perhaps elsewhere in the world. We simply do not know enough to be confident about economic outcomes.

Somehow, we want certainty and in doing so, we sometimes force our leaders and advisers into actions that are not necessarily in our best interest.

Now more than ever we must not move forward with false confidence but with small considered steps. 

Ps. I love to hear your comments. You can comment by hitting reply. Or you can comment in the section below on social media. You can subscribe to receive this blog weekly if you are not already receiving it in your inbox at http://www.foundationsa.com/contact/.

Kind regards,

Sunél

//22 MAY 2020

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