Unveiling the Power of Bias and Sampling: Lessons from Abraham Wald's Approach to Saving Lives and Sale Insurance

March 14, 2023

Unveiling the Power of Bias and Sampling: Lessons from Abraham Wald's Approach to Saving Lives and Sale InsuranceUnveiling the Power of Bias and Sampling: Lessons from Abraham Wald's Approach to Saving Lives and Sale Insurance

Abraham Wald was a brilliant mathematician who used his skills to solve complex problems during World WarII. One of the most significant problems he tackled was related to minimizing bomber losses to enemy fire. His approach was unique, and it involved analyzing the distribution of damage to aircraft returning after flying missions.

Wald realized that the military was making a mistake by focusing on the areas of the planes that had been hit by bullets and shrapnel. He pointed out that the military was only looking at the planes that had made it back to base, and not the planes that had been shot down. The planes that had been shot down were missing critical data that could provide valuable insights into how to improve bomber survival rates.

Wald suggested that the military should analyze the areas of the planes that had not been hit by bullets and shrapnel. He reasoned that the areas that had not been hit were likely the areas that were most vulnerable to enemy fire. By focusing on these areas, the military could improve the planes' survivability rates and reduce bomber losses.

This approach is an excellent example of the use of statistical inference to solve complex problems. Wald used his mathematical skills to examine the distribution of damage to aircraft returning from missions and used this data to provide valuable insights into how to minimize bomber losses.

Similarly, the use of information from the quantity of insured policies over the total number of quotes made can help businesses avoid bias and make more informed decisions.

For example, let's say a company wants to determine the percentage of their customers who are satisfied with their service. If they only survey customers who have made a purchase of a type of policy in which the insurer is very successful in sales, they may get a biased sample because those who did not buy may be dissatisfied and not be considered. By looking at the total number of quotes made, the company can get a more accurate representation of their customer base and make better decisions based on the data.

In conclusion, Abraham Wald's approach to solving the problem of bomber losses and the use of information from the quantity of insured policies over the total number of quotes made are both examples of the importance of understanding bias and sampling in data analysis. By looking beyond, the surface-level data, we can gain valuable insights that can help us makebetter decisions and achieve better outcomes.