Fake news is a huge problem in the US and around the world. More than 38 percent of people in the US have admitted to sharing news they didn’t know was fake.
It probably has happened to you too.
The credibility of news outlets and social media is at an all-time low. Some of the information being shared is outright false.
They’re spreading lies.
Fake news has been around for centuries. The famous author Mark Twain was alive more than 100 years ago and this is what he had to say about lies.
“There are three kinds of lies: lies, damned lies, and statistics.” Mark Twain
Then there’s the other side of the coin.
“Numbers don’t lie. Women lie, men lie, but numbers don’t lie.” Max Holloway
They say numbers don’t lie.
They don’t tell one side of the story or one version of the truth. They are the truth. They can’t be manipulated or skewed to say or mean anything other than what they actually show. They are facts.
But sometimes, people use numbers to support their lies.
It’s all in how we interpret them.
Statistics are directed at the rational brain, and we’re not always rational.
In a new book, The Data Detective, Tim Harford outlines some guiding principles for interpreting numbers. He’s an expert on economics and has a deep understanding of human behavior.
His first rule surprised me.
“Take note of how the statistical claim makes you feel.”
- He believes this tip can help prevent you from reacting emotionally when you interpret data. We are ruled by emotion and bias, both unconscious and conscious.
“Seek context and ask what is missing.”
- Algorithms find patterns and use them without considering underlying factors in the data.
- In 2018 Amazon’s algorithm reviewed resumes and used past successful applicants to choose the best candidates. Past applicants were generally men, so that caused the algorithm to penalize women in the process.
- The algorithm consistently downgraded the applications of women as a result.
Take it from someone who was an accountant.
We know how to omit, recategorize, capitalize, justify, classify, report, and expense an item in many creative yet legitimate ways.
- It’s not the numbers that are lying to you. It’s the presentation.
- It’s the selection of certain statistics to include in a report.
- You can highlight or put in bold the information you want to emphasize and bury the data you don’t.
- It’s the omission of other numbers.
Numbers are not objective, they are not absolute, and they do not tell the whole story.
Numbers can be manipulated and skewed to say or mean anything. They can be used to support an argument, prove a point, or back up a claim, but they can’t be used to contradict or prove the opposite.
Bestselling author Hope Jahren illustrates this concept in her clever book The Story of More.
She describes how we use numbers to support one side of an argument using her friend Brian, who quit smoking after being addicted since he was 16 years old.
How we got here and where to go next.
- When she wanted to play down the significance of smoking in Brian’s life, she would talk about how the amount he spent on cigarettes decreased as a percentage of his salary each year.
- When she wanted to maximize the significance of smoking in his life, she would talk about how the number of cigarettes he smoked increased 7 times over the years he smoked.
Here are three easy ways to use numbers to support your lies.
1. Lie by omission
Numbers can be selectively used to support an argument, prove a point, or back up a claim.
One classic way people manipulate numbers is by omission. If you are trying to prove a point, simply omit the numbers that don’t support your claim.
Numbers can be manipulated and skewed to say or mean anything other than what they actually show.
2. Lie using classification
In some situations, classification makes all the difference.
When you expense a cost, it decreases your profits in the current year.
When you capitalize it, your profits decrease by a much smaller amount each year as you write it off over time.
Enron was a classic case where dubious classification rules were used. They were the 7th largest company in the US, and they went bankrupt in 2001.
What did Enron do?
- They used existing rules to move debt off their balance sheet.
- They took debt and called it equity.
That’s like taking your mortgage payments and calling them income instead.
- They created off-balance-sheet partnerships to increase their income.
As long as their income kept going up, their stock price rose, and that made a lot of people money, so people didn’t question it.
The interesting thing is that what they did wasn’t exactly illegal. They just worked within the rules and stretched a few of them by creating complex justifications.
3. Lie using Inflated or Deflated Estimates
When you make an estimate, it’s easy to change an amount so it fits your argument.
You can say costs are lower than they are. It’s easy to say income will be high, even if you’re not sure. Using both of these two statements is a powerful way to improve a company’s bottom line.
WorldCom was a classic case of changing estimates. They were a telecommunications company that went bankrupt in 2002 following a massive accounting fraud.
WorldCom used creative accounting techniques to make its income look better than it was.
- They reported income in the current year when that income was really supposed to be counted in a future year.
- WorldCom took expenses and called them assets. That’s like saying your gas costs are an asset, the same as your car is.
- They made adjustments to amounts set aside to cover bad debts. Making these amounts lower made their overall earnings higher.
It’s easy to do when you are motivated to make the numbers look better than they really are.
Now that you understand how numbers can be used to support one side of an argument, it will be easier to take a breath and check the context of the data.
That way, you’ll be able to make your own interpretation of what the numbers reveal.