Research and Analysis for Management MGMT 6272 March 2016 Dr. Dennis E. Clayson

The class can be found online at

The first part of this class will be more philosophical than other MBA classes. The second half will be more practical than other classes.

A business manager must make decisions

To make good decisions a manager must have: good information

But first, to use information to make decisions, a manager must know what information is!

A manager must know what information is: And how information is created: And Used !

Managers typically make four mistakes….

Mistake 1: Not knowing what information is!

Mistake 2: Not seeking Information!

Mistake 3: Not knowing what to do with information!

Mistake 4: Not knowing when information is good or bad!

Mistake 1: Not knowing what information is! Some managers come to believe that: Data is information or Presentation is information Complexity Format Confidence of source

Mistake 1: Not knowing what information is! Mistake 2: Not seeking Information! How does a person become a leader or manager? They probably have a history of correct decision making, or they believe they do.

Mistake 1: Not knowing what information is! Mistake 3: Not knowing what to do with information! Mistake 2: Not seeking Information! Bureaucrats are interested in PROCESS not in OUTCOMES.

Bureaucrats are interested in PROCESS not in OUTCOMES. This is a very important idea! It is very seductive for a manager to be sucked into process rather than into outcomes. We once asked managers of mid-sized businesses where it would be most important for them to spend their time and efforts. At the time, they said marketing. We later asked them where they spent their time. They spent less time doing marketing than any other part of their job!

Mistake 1: Not knowing what information is! Mistake 3: Not knowing what to do with information! Mistake 2: Not seeking Information! Mistake 4: Not knowing when information is good or bad!

Mistake 3: Not knowing what to do with information! Mistake 4: Not knowing when information is good or bad! This is where we will spend most our time!

Much of the information that is utilized for management decisions comes from numbers….

Much of the information that is utilized for management decisions comes from numbers…. OR is calculated from numbers, OR is explained by numbers….

This, however, creates a fundamental problem! Many people are: Inumerate… i.e. They are illiterate with numbers.

Numerical concepts for them are very confusing….

We had to have the garage door repaired. The Sears repairman told us that one of our problems was that we did not have a 'large' enough motor on the opener. I thought for a minute, and said that we had the largest one Sears made at that time, a 1/2 horsepower. He shook his head and said, 'Lady, you need a 1/4 horsepower.' I responded that 1/2 was larger than 1/4. He said, 'NO, it's not..' Four is larger than two.' My daughter and I went through the McDonald's take-out window and I gave the clerk a $5 bill. Our total was $4.25, so I also handed her a quarter. She said, 'you gave me too much money.' I said, 'Yes I know, but this way you can just give me a dollar bill back. She sighed and went to get the manager, who asked me to repeat my request. I did so, and he handed me back the quarter, and said 'We're sorry but we could not do that kind of thing.' The clerk then proceeded to give me back $1 and 75 cents in change. Actual Examples

Some Americans were very impressed when the government promised to cut $100 million in spending from $2 trillion in spending.

Why? Because $100 is larger than $2.

Innumeracy Test 1. A person produces about a liter of urine/day (0.04 cubic feet), how big a cube would contain all the urine produced in Hong Kong in one day? 1 meter = 3.28 feet

Innumeracy Test 1. A person produces about a liter of urine/day (0.04 cubic feet), how big a cube would contain all the urine produced in Hong Kong in one day? 2. How tall is the International Commerce Center (Kowloon) in feet?

Innumeracy Test 1. A person produces about a liter of urine/day (0.04 cubic feet), how big a cube would contain all the urine produced in Hong Kong in one day? 2. How tall is the Sears Tower (Chicago) in feet? 3. How fast does hair grow in MPH?

Innumeracy Test 1. A person produces about a liter of urine/day (0.04 cubic feet), how big a cube would contain all the urine produced in Hong Kong in one day? 2. How tall is the Sears Tower (Chicago) in feet? 3. How fast does hair grow in MPH? 4. The American federal debt is now $19.1 trillion. a) There are 270,000 people in America that had taxable income of a million. How much would each have to pay to eliminate the national debt?

Innumeracy Test 1. A person produces about a liter of urine/day (0.04 cubic feet), how big a cube would contain all the urine produced in Hong Kong in one day? 2. How tall is the Sears Tower (Chicago) in feet? 3. How fast does hair grow in MPH? 4. The American federal debt is now $19.1 trillion. a) There are 270,000 people in America that had taxable income of a million. Is this enough? b) If everyone in the US that had an income of a million a year had to pay 100% of their entire income to the government, how many millionaires would it take to pay off the debt?

Innumeracy Test 1. A person produces about a liter of urine/day (0.04 cubic feet), how big a cube would contain all the urine produced in Hong Kong in one day? 2. How tall is the Sears Tower (Chicago) in feet? 3. How fast does hair grow in MPH? 4. The American federal debt is now $19.1 trillion. a) There are 270,000 people in America that had taxable income of a million. Is this enough? b) If everyone in the US that had an income of a million had to pay 100% of their entire income to the government, how many millionaires would it take to pay off the debt? 5. An increase of dopamine will decrease the tremors of Parkinson disease. True or False; an decrease of dopamine will cause Parkinson?

Even worse, they are not quite sure what to do with numbers when they get them……

Introduction Section 2

Next Topic: What is knowing?

What are we doing when we are knowing?

Phrenology: A science? Based on the shape of your head.

Everything we KNOW about the outside world comes from our own brains. It is very important to remember that there is no exception to this!

Everything we KNOW has to come from a perception formed by our own mind.

Illusions

Galileo Galilei Logic

Galileo Galilei Evidence

Descartes wrote: “Our inquires should be directed not to what others have thought, not to what we ourselves conjecture, but to what we can clearly and perspicuously behold and with certainty deduce; for knowledge is not won in any other way.” Rene Descartes (1596 – 1650)

Giambattista Vico (1668 – 1744) Vico states: “The criterion and rule of the true is to have made it.” The principle states that truth is verified through creation or invention and not through observation.

Knowledge creates knowledge because proper knowing creates more knowing!

What is this?

But there are no volcanoes or lava flows in the Olympic Mountains!

Topic: Logic and Research

Logic and Research are related Opinion = Belief and/or a Guess

Logic and Research are related Opinion = Belief Hypothesis = Opinion that can be tested

Hypo =Under Thesis=Idea or thought Hypothesis=Underlying idea

Logic and Research are related Opinion = Belief Hypothesis = Opinion that can be tested Statistic = Method of calculating probability

Logic and Research are related Opinion = Belief or Guess Hypothesis = Opinion that can be tested Statistic = A characteristic of a sample

A statistic is a characteristic of a group. It tells us nothing about an individual except for a probability.

A statistic is a characteristic of a group. It tells us nothing about an individual except for a probability. This is a VERY important concept and one that many people get wrong!

Men are taller than women… This is statistically true….

In the U.S. Asian Americans have an average IQ higher than African Americans

What does this tell you about the famous economist Thomas Sowell?

What do statistics tell us about this person? What information do we have?

She is 40 years old. She has a MD degree. She works in Vancouver. Can you now make a better guess about her income and position?

She is 40 years old. She has a MD degree. She works in Vancouver. Can you make a good guess about whether she has a good income? Can you make a good guess about whether she is married?

Statistic: Education majors have the lowest standardized scores (ACT, Iowa Basic, etc.) of any majors on campus.

Statistic: Education majors have the lowest standardized scores (ACT, Iowa Basic, etc.) of any majors on campus. An education major says, “That can’t be true. Both my friend and I had the highest ACT scores in my high school and we are both education majors. I am highly offended by your slur.”

Statistic: Education majors have the lowest standardized scores (ACT, Iowa Basic, etc.) of any majors on campus. An education major says, “That can’t be true. Both my friend and I had the highest ACT scores in my high school and we are both education majors. I am highly offended by your slur.” What is wrong with this logic?

Logic and Research are related Opinion = Belief or Guess Hypothesis = Opinion that an be tested Statistic = A characteristic of a sample Research findings = Results of controlled research procedures

Be careful here….. Research findings do not mean that something is true! They simply increase the probability….

In 2015, a study of life science research published in top journals showed that only 36% could be replicated. It has been estimated that $28.2 billion a year was spent on research that could NOT be replicated. Speaking of Science Many scientific studies can’t be replicated. That’s a problem. News headline:

Facts and Reality

Logic and statistics are sometimes difficult in the real world….

Take the NBA as an example!

The ratio of Afro-American to Euro-Americans in the NBA is about 4:1

The ratio of Afro-Americans to Euro-Americans in the USA is about 1:6

The probability of an Afro-American child becomes an American NBA player is 24 times larger than an Euro-American child…. Why?

Theory is fun… Reality can be very hard and messy….

Social Security When to Start Collecting? Example

In the US, how much you collect in SS in a month depends on when you start to collect your funds.

At 66, you will get about $2,200/month… At 70, you will get about $3,000/month… But you would have to give up $2,200/month for 4 years, or $105,600…. After 70, it would take 132 months (11 years) to make up the difference … So, if you thought you would die before you are 81… take the money now…. What decision will you make??

At 66, you will get about $2,200/month… At 70, you will get about $3,000/month… What decision will you make?? What information do you want before you make this decision?

But………. How long do people actually live?

Global Warming

Co2 Temp Sun Spot Number

1,122 Record Cold Temps in the U.S. in one week July in the USA ends on a frigid note as record cold outpaces warmth nearly 10 to 1 71% Of The US Below Normal Temperature in 2013 South America in massive deep freeze July 20,

The Australian Bureau of Meteorology has been caught red- handed manipulating temperature data to show "global warming" where none actually exists. Source: Breitbart Date: Aug. 15, 2014 Writer: James Delingpole British writer and Oxford grad Libertarian Conservative