The Data Doesn’t Lie

But your assumptions do. All predictive data sets are based on certain assumptions. Whether you are estimating costs or returns, there are a few inherent assumptions in the data. Even if these assumptions are off slightly, drastic differences appear in the end result.

The first step after developing a mathematical or statistical model is to check your assumptions. Are you fundamental assumptions accurate? If you’re not confident, it’s usually worth it to take a step backward in the process and begin collecting data about those assumptions. If that is not possible, at least run several scenarios – a probable, low, and high scenario so you know your risks.

Data is meant to help you make better decisions, but you must have accurate assumptions to base your findings.