A recent study by Norwegian researchers Thomas Hansen and Britt Slagsvold found that equally sharing housework between spouses might be bad for your marriage. After analyzing data of thousands of Norwegian couples, Hansen and Slagsvold found the divorce rate was higher for those doing equal amounts of housework than in couples where the women did more of the work. My first thought after reading this was that the International Association of Married Men must have funded the study. Okay, there is no International Association of Married Men (at least not that I am aware of), but the study and the findings are real.
Now before every married man reading this blog picks up the phone to call his wife and tell her this amazing news (and before every married woman reading this blog sends me hate mail), please read on.
Reading the findings of this study made me think of an important financial truth that you need to be mindful of in managing your family’s finances. Namely, that correlation is not the same as causation. Let me translate that from geek speak. I will never forget my first introduction to this truth when my statistics professor in business school told us that there was an almost perfect correlation between liquor sales and pastors’ salaries. As young impressionable students, we were all shocked, to say the least. That is, until he explained that there is a difference between correlation and causation.
In the most basic terms, correlation says that two things move together. For example, pastors’ salaries increased at the same time that liquor sales increased. So, they were in fact correlated. Now for the more important question – did the increase in pastors’ salaries cause the increase in liquor sales? Hopefully not! You see, therein lies the danger of assuming that the one thing (increased pastors’ salaries) caused the other thing (increased liquor sales). There was correlation, but most likely not causation.
Why is this important when it comes to your financial life? Because somebody may provide evidence that two things are correlated and then imply that one thing caused the other. Causing you to make faulty decisions.
Take the so-called “Super Bowl Indicator” for example. The indicator says that the stock market’s performance can be predicted based on the outcome of the Super Bowl that year. You see, there is in fact a high correlation between which NFL conference wins the Super Bowl and the performance of the stock market that year. The indicator says that if an NFC team wins the Super Bowl, the stock market will have a good year and if an AFC team wins the Super Bowl, the stock market will have a bad year. It has actually been right in 33 out of the last 41 years – a success rate of over 80%. What do the two things actually have to do with each other? Nothing! There is correlation but obviously no causation.
Assuming there is always causation where there is correlation can be hazardous to your financial life…and in the case of the Norwegian marriage study – hazardous to your marriage!