But when people do that, they often end up making poor decisions. This is true for generalists and specialists alike, because even experts who are aware of nonlinearity in their fields can fail to take it into account and default instead to relying on their gut. Similarly, if the price of coffee is $2, you can buy five coffees with $10, 10 coffees with $20, and 15 coffees with $30.īut in business there are many highly nonlinear relationships, and we need to recognize when they’re in play. In many situations, that kind of thinking serves us well: If you can store 50 books on a shelf, you can store 100 books if you add another shelf, and 150 books if you add yet another. Our brain wants to make simple straight lines. Decades of research in cognitive psychology show that the human mind struggles to understand nonlinear relationships. If you’re still having trouble grasping this, it’s not your fault.
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Shockingly, upgrading fuel efficiency from 20 to 100 MPG still wouldn’t save as much gas as upgrading from 10 to 20 MPG.īut choosing the lower-mileage upgrade remains counterintuitive, even in the face of the visual evidence. When you do the math, the relationship actually looks like this:Īnd when you dissect the curve to show each upgrade scenario, it becomes clear how much more effective it is to replace the 10 MPG cars. Gas consumption is not a linear function of MPG. We tend to think it’s linear and looks like this:īut that graph is incorrect. That’s because in our minds the relationship between MPG and fuel consumption is simpler than it really is. Is this surprising? For many of us, it is. But if you map out relationships in data visualizations, you can actually see whether they are nonlinear and how - and then make choices that maximize your desired outcome. If you don’t recognize when they’re in play, you’re likely to make poor decisions.
Nonlinear phenomena are all around in business: in the relationship between price, volume, and profits between retention rate and customer lifetime value between search rankings and sales.
This is just one of four nonlinear patterns the authors identify in their article. As fuel efficiency increases, gas consumption falls sharply at first and then more gradually. Would it surprise you to know that upgrading a car from 10 MPG to 20 MPG saves more gas than upgrading from 20 MPG to 50 MPG? Because it does.
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But frequently relationships are not linear: The time savings from upgrading a broadband connection get smaller and smaller as download speed increases. Often, this is the case: The amount of data an iPad will hold increases at the same rate as its storage capacity. As a result, people tend to expect that relationships between variables and outcomes will be linear. The human brain likes simple straight lines.
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