Data Requires Context
I’m guessing you’ve seen some of the same headlines I have. “Microsoft announces layoffs of 10,000 people”, “Google to cut 12,000 jobs”, or “Amazon eliminates 18,000 total jobs”. On the surface, this seems pretty scary and reinforces the narrative of a pending recession. If those companies are doing mass layoffs, is my job safe? With tens of thousands of layoffs at these large companies, unemployment is about to go through the roof, right? The sky is falling!
But then you read an article that says unemployment is at 3.4%, which is a 54 year low. This seemingly conflicting information might leave you scratching your head. With the tech company layoffs, the two graphics below partially explain what’s happening (note one is % change, the other is raw # of people).1
To summarize, they all did a lot of hiring starting in Q4 2019 with COVID as an accelerant. The article would argue the recently announced layoffs aren’t all that significant in the context of the hiring sprees. Another point made is the tech industry only makes up 2.8% of US unemployment.
But even the graphic above has me perplexed. Notice time stamp on the bottom says “Q4 2019 to Q3 2022”, and the article was written near the end of January 2023. A lot of the tech layoff announcements occurred after Q3 2022, so is this chart misleading?
That said, I think the article still makes a valid point. Now don’t get me wrong, I’m not downplaying the impact on individual people. If you recently lost your job at Amazon or Google, it’s a huge deal and I don’t mean to minimize that. I’m just making the point that “data requires context”. In this situation, you need to look at the recent layoffs in the context of the large pandemic related headcount growth. If you’re trying to extrapolate a single headline into what’s happening in the US or the world, you really need to do some additional research to try to understand the broader picture.
I’ve been encountering this dynamic in my new company and job. There are an abundance of reports and dashboards. “This category is down X% in sales year-over-year.” “Our costs have increased by Y%.” The information is valuable, but once again requires context. A simple example is a sizeable chunk of the business I’m responsible for came through an acquisition that still operates on a separate ERP/accounting system. So the vast majority of the reports that are comprehensive for peers of mine, are missing a large part of our category’s revenue. Not understanding that and other context could result in bad decisions being made based on the data
I think the “data requires context” theme can apply to health as well. I recently had a comprehensive blood panel done, if one reading out of over 100 is slightly above range, but I feel good and am eating well and exercising regularly, should I be concerned? Or maybe someone loses 10 pounds to start the new year, but gained 40 in the previous year…similar theme to the tech layoff article. Again there’s a risk reading too much into a single measurement, report, or data point.
That’s all for now, short post this week with my hands full in a new job and having just moved with the family to North Carolina. Just remember that data requires context. Next time you see a headline or singular data point and you’re tempted to make a generalization based on that, instead do a little more digging and try to see the broader picture. It may still be relevant, but often the quote below rings very true.
Here are a few of the favorite things I’ve read and watched the last couple weeks:
Twitter Thread - Price's Law by Thomas Ince - I’d never heard of Price’s Law so I found this thread to be thought provoking. I’m not sure I totally agree with the math in all situations, but I do think the general trend is true. This means as your organization grows, you need to keep a close eye out for waste and ensure everyone is pulling their weight rather than being concentrated in just a few people
Movie - Glass Onion - this is the sequel to “Knives Out”, although it stands on its own so don’t worry if you want this first. Several big name actors & actresses. I really enjoyed this one (watched on Netflix), entertaining, funny, and keeps you guessing right up to the end with several twists & turns along the way
Short Video - John Mayer Creating Music in Real-Time - I just thought this video was super cool. It’s so easy to get caught in “analysis paralysis” and overthinking things. This beautifully demonstrates the power of just acting and pushing forward on a very micro-level, even when its uncomfortable
Article - Fake It Till You Make It by Chenmark - this actually pairs nicely with the short video above. Imposter syndrome is a real thing that most successful people face, and the goalposts keep shifting. Don’t let those insecurities hold you back, and keep pushing forward
Quote - We live in a society that peddles solutions, whether it's solutions to those extra pounds you're carrying, or to your thinning hair, or to your loss of appetite, loss of love. We are always looking for solutions, but actually what we are engaged in is a process throughout life during which you never get it right. You have to keep being open, you have to keep moving forward. You have to keep finding out who you are and how you are changing, and only that makes life tolerable. - Jeannette Winterson