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"In God we trust; all others must bring data." ~ W. E. Demming

Logic professors call it the base-rate fallacy.  It’s the logical blunder that occurs when we use irrelevant information to form our judgments, especially when objective data exists.  A common base-rate fallacy is to assume your personal experience mirrors the masses.   A current example, “I don’t use social media, so neither does anyone else.”  If this sounds like you please read a study published by the University of Maryland that found social media adoption by small businesses doubled in 2009.

Now consider argumentum ad populum, or the “if many do it, it is so” fallacy.  Just like our personal experiences doesn’t always mirror the masses, mass perception doesn’t always mirror our own experience.

When pay-per-click marketing first started catching on it was possible to sponsor popular keywords for five cents per click.  The early adopters made a killing, but as word of their success spread the price of keywords grew exponentially.  The people on the tail end of the craze lost a lot of money.  In this case, timing determined your success more than anything else.

To find opportunities online you have to be willing to test early, test often, and be prepared to invest in the things that show promise.  Relying too much on personal experience or popular perceptions will  lead to failure more often times than success.

Dr. Demming said it best, “In God we trust; all others must bring data.”

Tags: argumentum ad populum, base-rate fallacy, logic

This entry was posted on Saturday, April 3rd, 2010 at 3:26 am and is filed under musings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.