One of my favorite lessons during the Six Sigma training and certification program is "correlation, not causation."...
In fact, "correlation, not causation" becomes something of a Six Sigma mantra after awhile, and I actually witnessed someone shout the phrase and then high-five someone at a Kaizen event once. Six Sigma and business analysts love to spot "correlation, not causation" in the field because it's so easy to take down. Nevertheless, it's an important concept that CIOs should be aware of when they're deciphering trends and big data analytics.
For instance, this week, The Washington Post's innovation blogger, Dominic Basulto, postulated that retiring baby boomers are the innovators of the future. His supporting evidence is that retiring baby boomers are starting companies at a faster pace than ever before, while Millennials (people born between 1980 and 2000) have the lowest rate of entrepreneurship across the board. Basulto isn't lying: The statistics are sound. However, I think what we have here is a classic Mark Twain example of "lies, damn lies and statistics."
In fact, this is a textbook case of "correlation, not causation" at work. The baby boomers aren't driving innovation because there is something special about their "baby boomer-ness." Rather, many boomers are finding themselves with lots of free time and, if they invested wisely, some IRA money to play with. As a cohort, they tend to have the generational trait of engaging in new business ventures; and because of when in the economic cycle they made their money, they tend to have more of it. It's just who they are as a generation.
My favorite 'correlation, not causation' is the assertion that baby boomers are driving new innovations in technology.
Meanwhile, Millennials more readily accept jobs at lower pay to gain experience, and tend to value work-life balance (a trait that tends to be counterintuitive to entrepreneurship) more than other generational cohorts do. Unlike baby boomers and some Generation X folks (born between the early 1960s and the early 1980s), Millennials are coming of age when there isn't a lot of college grant money and tuitions are increasing at a disproportionate rate, making it likely that they're dealing with crushing student loan debt. (Mark Zuckerberg may technically be a Millennial, but his behavioral traits tend to lean a little toward old-school Gen X.)
So, how many baby boomers are capitalizing on the innovative ideas of younger generations simply because they have the ability to bankroll them? And, if that's a high percentage, does that mean that the baby boomers are the true innovators? Or are they are getting their innovative ideas from the Millennials?
Then there's the apples-to-oranges comparison. The Kauffman Foundation study cited by Basulto compared people in similar age groups from 1996 to 2011. It revealed that in 1996, 14.3% of respondents aged 55 to 64 were starting new businesses, compared to 20.9% in the same age bracket in 2011. And in 1996, roughly 35% of respondents aged 20 to 34 were starting new businesses, whereas in 2011, 29.4% of people in that age bracket were starting new businesses. Seems like you could draw a correlation that older folks are driving business innovation, right?
Not so fast. Note that there's a 15-year gap between stats, so conceivably, someone who was 40 in 1996 (and fell right in the middle of the 35-to-44 age bracket that year) would be 55 in 2011, and fall into in the 55 to 64 age bracket that year. If you reframe the argument, 27% of the respondents aged 35 to 44 were starting new businesses in 1996, but that same generation had a 7% decline over the next 15 years.
Certainly, retiring baby boomers are doing more entrepreneurial activities than their older generational cohort, the Silent Generation, people born from 1925 to 1945, who are now 67 to 87 years old. But if you look at the spread of the four age groups, you'll see that the baby boomers were actually last in creating new businesses in 2011.
My favorite "correlation, not causation" is the assertion that baby boomers are driving new innovations in technology because they have the fastest rate of social media adoption. I mean, seriously? Sure, in 2010, retiring baby boomers were signing up for Facebook and Twitter more than any other group. But does that make them sound like early adopters to you? Gen-Xers and Millennials christened their Facebook and Twitter accounts five years earlier. In fact, if anything, that very statistic shows that baby boomers are actually pretty slow to adopt new innovations in technology.
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Certainly, the social media revolution is here, but retiring baby boomers are hardly leading the charge. Logical fallacy, your table is ready. Stale data, you're next to be seated. (If you're in the mood for something a little fresher, here's a June 2012 Pew Internet metrics survey on social media and baby boomers.)
Of course, "correlation, not causation" is a tempting carrot when you're searching for answers. It's tempting to draw the conclusion that baby boomers are driving new innovations in technology, but in fact, the statistics don't tell the complete story -- or even half of it.
Don't be fooled by "correlation, not causation," even when it draws a compelling picture. If you do, then perhaps you'll also believe that babies named Ava caused the U.S. housing bubble.