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Data Analysis Basics

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Making Better Decisions with Data Analysis

3:17 with Ben Deitch

Let's see how data analysis can help us make better decisions!

[SOUND] Hi I'm Ben and 0:00
welcome to data analysis basics. 0:03
Making decisions with data. 0:09
We all make decisions. 0:11
We decide when to get up and 0:12
go to sleep, what to eat, where to go to school or work. 0:14
And that's only scratching the surface. 0:18
Data analysis is the process we use to examine information and 0:20
make better positions. 0:24
Sometimes, we'll see this is beautiful charts and graphs. 0:26
But it doesn't have to be fancy to be data analysis. 0:29
In fact, we all do this naturally every time we go to the grocery store. 0:32
Imagine you're looking for some peanut butter. 0:36
It's a small store and they only have two options. 0:39
A 10 ounce container that costs $5 and a 20 ounce container that costs $8. 0:42
Since you get twice as much peanut butter with the 20-ounce option and 0:47
the price is less than doubled, the larger jar is the better deal. 0:51
That's a pretty simple example of data analysis. 0:56
We took the prices and sizes of two different products and 0:59
made a decision which product to buy based on that information. 1:03
Though it's not always so simple. 1:07
What if you are the CEO of McDonald and you had to pick between two cities for 1:09
a new location, what would you do? 1:13
Our brains can only process a limited amount of input, so 1:16
we take shortcuts to determine what's important, and sometimes we make mistakes. 1:20
These kinds of errors in perception are called cognitive biases. 1:24
One of these that affects our ability to analyze data 1:28
is that humans tend to find patterns in completely random data. 1:31
These can cause us to identify trends which are really just 1:35
random variations overtime. 1:38
If I flip a coin ten times and get ten heads in a row, 1:41
its tempting to say that the next flip will almost and definitely be heads. 1:45
But really, it's just about 50% chance. 1:49
Other cognitive biases lead us to put more weight on some observations than others. 1:53
If we already have an idea of what the data will say, 1:58
then we'll tend to notice examples that confirm our theory. 2:01
We'll also give more weight to more recent data than we give to older data. 2:04
Data analysis gives us methods to see beyond our biases, 2:09
to get at the truth of what the data shows. 2:13
Let's go back to the grocery store. 2:16
This time, it's a large supermarket with dozens of options and 2:18
several different brands. 2:22
We've got chunky, smooth, natural, there's even one with a chocolate swirl. 2:23
If you're on a budget you could be here forever trying to figure out 2:29
which choice is the most cost effective. 2:32
But at some stores they help you out by showing you each jar's price per ounce. 2:35
They do the math for you, reducing the amount of information that 2:40
you have to process and making it easier to compare different options. 2:43
If you wanted to use data analysis to help pick the new McDonald's location, 2:48
maybe you'd look at traffic data for each city and 2:52
compare that to the available properties to help narrow it down. 2:55
Just like the price per ounce label, data analysis reduces complex sets of 2:59
information into insights that are easy to understand. 3:03
And these insights can help us make difficult decisions much simpler. 3:07
Coming up, we'll look at where where we can find some data to help us make those 3:12
difficult decisions. 3:15