Tuesday, 15 September 2015

Yet another flawed statistical study attracts massive unquestioning attention

The Guardian, 29 Sept 2015
A very widely reported story in today’s news (see, for example, the report in the Guardian and this Press release) claims that companies in which there is at least one female executive on the Board (‘gender diverse’ companies) in the US, UK and India outperform companies with male-only executives by a staggering US$655 billion per year. The story is based on a study by Grant Thornton whose representative Francesca Lagerberg concludes:
“The research clearly shows what we have been talking about for a while: that diversity leads to better decision-making”.
As is typical when the results of a statistical study fit a popular narrative, the story attracted massive, unquestioning attention. Unfortunately, while I am sure that most people agree that greater gender diversity in the Boardroom is a worthy objective, based on the ‘full report’ – and in the absence of other data - Lagerberg's claim is simply not supported. In fact, the study exemplifies some of the classic misuses of statistics that we wrote about in the first chapter of our book and highlights yet again the need for proper causal/explanatory models to be used in statistical studies such as these*.

Moreover, using the data in Lagerberg's study it is possible to construct a simple causal model (a Bayesian network) that replicates the results but with provably opposite conclusions: diversity decreases performance.

The full report and BN model are provided here. The model can be run in the free version of AgenaRisk.

*Making such an approach both universally feasible and acceptable is the major objective of BAYES-KNOWLEDGE.