“There are three kinds of lies: lies, damned lies, and statistics” −Mark Twain
As a financial type, I spend a large portion of my time sifting through data with the hope that I will find the answer to some burning question. Unfortunately, few issues are straightforward, and the use of several different statistics can lead to confusion or even opposing conclusions. We currently have a simple but powerful example.
To evaluate the financial well-being of Americans, one might reasonably ask: what is the net worth of the average adult? According to a recent report by UBS, the average in 2024 was $620,654 which was second only to that of Switzerland. Wow, that is very impressive! However, the average is impacted by data points at the extreme; in this case the net worths of the super-wealthy. In other words, the average does not tell you anything about how wealth is distributed. Another statistic is the median which is the midpoint when the net worths of all adults are lined up. Therefore, 50% of adults fall both above and below this figure. For 2024, median net worth in the U.S. was $124,041, just 20% of the average. Using this measure, the U.S. falls to 15th place in the global wealth rankings lagging, among others, Australia, Denmark, New Zealand, Switzerland, the UK, and Canada. Here is the problem; both statistics are correct, but they leave open the question of whether the average American is well off.
The correct approach to using data is to collect as many statistics as possible, analyze them, and then form a carefully reasoned conclusion. Unfortunately, many people cherry-pick data points to support a preconceived position or ideology and conveniently ignore conflicting information. That practice is known as confirmation bias and it afflicts many aspects of life, particularly the political arena. I am a strong believer in basing decisions and opinions on facts, but this example demonstrates the importance of diligence and balance.