Correlation and causation

by Admin
Updated: July 2, 2018

Correlation and causation is often misunderstood when it comes to the habits of successful people

Sometimes correlation can easily be dismissed because it is obviously not indicative of causation. A closer look, however, can reveal more insight when you question what is actually being measured.

The habits of successful people are often misleading when they are taken at face value. All elephants may be gray, but painting yourself gray will never make you an elephant. But there really are causal relationship and they fall into one or more of these three classes:

  1. Avoiding distraction
  2. Positive association
  3. Participation & growth

Correlation

I have read that Warren Buffet, Bill Gates, Donald Trump and many other successful people eat at McDonald’s. If you take this group as your sample you can observe that all successful people eat McDonald’s. This is a perfect 1:1 correlation, so does it suggest that eating McDonald’s will make us successful?.

If we pick a different sample such as successful people who don’t eat McDonald’s or unsuccessful people who do, we can conclude that eating McDonald’s has no bearing on success at all.

We know that correlation does not imply causation and the idea that eating fast food for breakfast will make us rich is so obviously wrong we can dismiss it - or can we? Maybe it’s not exactly McDonald’s that’s significant.

Avoiding distraction

If you want to be successful you need apply yourself to what you’re doing. When you start your day, you have things to do, fresh ideas and energy. A complicated and time-consuming breakfast will work against all that.

There are three main benefits of eating McDonald’s, especially for breakfast, and they have nothing to do with taste or nutrition:

  1. Reliability - A breakfast is reliable when you do the same things and it provides the same experience - it doesn’t interrupt your thought processes.
  2. Speed - A quick breakfast enables you to get to work as soon as possible - fast food is (or should be) fast and there are no dishes to do afterwards.
  3. Endurance - A high calorie breakfast that takes a long time to digest allows you to get more done before hunger distracts you again.

I don’t eat McDonald’s but I do have the same things every day for breakfast. This has the same benefits when I’m at home but tends to break down when I’m in Asia. But McDonald’s is there and essentially the same as everywhere!

A similar rationale applies to clothing: Dress the same every day (but this also breaks down when traveling to a different climate).

Positive association

Positive association works in two directions: External/outwards - your effect on others - and internal - their effect on you.

External: Executives may wear suits but wearing a suit will not make you an executive... Except that it can have a positive effect. When your appearance is in line with what others expect from a certain type of person, you become as such in their eyes.

Internal: Spending time in the company of athletes will not make you an athlete but you will gain intimate knowledge about them & their sport beyond what you could achieve as an ordinary fan.

Participation

Years ago I came across a news story that said people who take more showers are healthier. I thought it was a joke - people who shower more are generally those who exercise more.

Thinking about it more carefully, there is at least a lower limit where not showering enough has bad effects. Nevertheless, I am certain that taking more showers will never be as effective for improving health as doing some exercise.

When it comes to money, no amount of knowledge nor quality of appearance will make any difference without participation. You cannot grow investments if you don’t have any. You cannot succeed in business if you aren’t involved in business.

Causation

In order for our habits to be useful we need to make sure they are founded on solid principles of causation and not some vague ideas of correlation.

As far as this applies to wealth development:

  1. Minimize distractions: Even though you cannot always be working, you can always be thinking.
  2. Cultivate positive associations: Spend time with - and learn from - people who have good attitudes; plus, look like you are one of them.
  3. Learn & win by doing: Have a hand in the game, no matter how small to begin with.

While good habits do not guarantee success, they make it much more likely. Some habits probably make little difference. However, some habits make failure highly probable so it’s essential to eradicate these as soon as possible.

More info

A conversational description of correlation & causation at web.cn.edu.

“What Donald Trump’s and Warren Buffett’s McDonald’s orders tell us about them” at marketwatch.com.

Introduction to quantitative analysis, “How to Calculate the Correlation Coefficient” at thoughtco.com.

Spurious correlations at tylervigen.com - fascinating & ridiculous.

Internal links

The billionaire mindset myth You are making a difference Minimum and Goal The focus dilemma Go to Articles
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