The Art of Thinking Clearly

by Rolf Dobelli

Suppose you read the following story in the newspaper: “Start-ups employ smarter people. A study commissioned by the National Institute of Unnecessary Research has calculated the average IQ in American companies. The result: Start-ups hire MENSA material.” What is your first reaction? Hopefully a raised eyebrow. This is a perfect example of the law of small numbers. Start-ups tend to employ fewer people. Therefore the average IQs will fluctuate much more than those of large corporations, giving small (and new) businesses the highest and lowest scores. The National Institute’s study has zero significance. It simply confirms the laws of chance. So, watch out when you hear remarkable statistics about any small entities: businesses, households, cities, data centers, anthills, parishes, schools, and so on. What is being peddled as an astounding finding is, in fact, a humdrum consequence of random distribution. In his latest book, Nobel Prize winner Daniel Kahneman reveals that even experienced scientists succumb to the law of small numbers. How reassuring.