Reading this may or may not make you smarter

"The bus always leaves when I reach the end of the road"

Imagine you are the proud owner of a (admittedly irregular, but fair) four-sided dice, instead of the usual dot patterns the faces are marked with 'N', 'S', 'E' and 'W'.  Imagine also that you are standing at the base of Trafalgar Square intending to go for an unusual stroll.  Before taking a step you roll the dice.  You observe the result and take one pace in the direction indicated by the dice (North, South, East or West).  You repeat this until your legs wither.  Where do you end up and what does your route look like?

It might look something like the image to the right.  Such an exercise is a 'random walk', the mathematical implications of which we will not discuss further.   I've told you how this graph was constructed, but given the only the graph would you have been able to determine (or even guess) what created it?   If I had told you that this graph showed the most polluted zones in a city you'd probably want to live in the extreme North-West of the diagram.  

The problem for humans as decision makers is that we are only presented with the physical results of a process not the generator.   Nassim Nicholas Taleb states this problem better than I ever could, in the context of trading.  He uses a coin toss but we can equally apply our random walk.  Let us start with 4000 traders, each with their own dice.  At each step we eliminate (remove from the game) those who fall behind the most northerly traders and reward the remaining traders with 10,000 pounds and a bigger office.  At each step we lose (on average and approximately) 3/4 of traders (and their massive offices) since rolling anything other than a 'N' sees you ejected from the game (well, ignoring the pathological case were no trader rolls a 'N').    Imagine you are recruiting for an investment fund, who do you pick to manage it?  I'd pick one of those superstar traders striding forward.

Unfortunately we have to make decisions based on visible perturbations of the world - when standing in the middle of the road too much philosophising about the nature of  traffic flow results in one less philosopher.   A tool that has served us well, or at least during our rise to the top of the food chain, is that of correlation.   A caveman who notes that all those cavemen who have hats made of leaves are (generally) not eaten by lions may fashion himself an equally leafy hat.  If his inference is correct and having a hat of leaves causes the lions not to eat you then he has extended his life by possibly many years.  He may be wrong, maybe it is not the hat that scares away lions, consider that those with leafy hats must be able climb the tall trees to get the leaves for the hats.  It is this climbing ability that allows them to escape tigers.  So it was not the hat causing the lack of death: it was the ability to climb trees that caused both the immunity to tigers and the silly hats.   If we assume causality then in the worst case we are wearing a pointless hat, if we miss the pattern then we are dead.  

The authors of Freakonomics (another good read) give a contemporary example: childrens' names.  In summary: whilst most rich children are called Cuthbert; naming your child Cuthbert won't make your child rich.  It's clear from the caveman's hat dilemma that assuming causality in earlier days this served us well.  However, in modern, interconnected and fast-paced situations blindly inferring causality (that one event causes another) can be as detrimental as missing the relationship all together.  

Cargo cults are groups of otherwise intelligent people copy the external attributes of a process.  The term originates from tribes who (at least according to Wikipedia) upon seeing that nearby armies received food and supplies from airplanes landing at airports, assumed that it was the presence of the airport that caused the food to arrive.  In attempt to receive their own food they built all the external facets of an airbase: runways, headphones, a control tower.  Of course no food came.    

We are coming close to the moral of today's story.  Remember, when you see two events, A and B say, there are four causal possibilities (ignoring mutual causation):

1. A causes B (when A happens B happens).
   
2. B causes A (when B happens A happens).
   
3. A and B are not causally related, (it was just chance that they happened to occur together, e.g having a rock in your front garden and not being eaten by a tiger).
   
4. Another event, C, causes A and B (see the leafy hat example).
   

So if you hear that the successful company down the road uses some technology or technique, e.g. an advanced spanner, and you blame all your failures on a lack of such a spanner, remember that followed to its logical conclusion you may end up wearing a leafy hat or building an airport out of palm trees.