Hypothesis Testing
This approach compares alternative hypotheses against consistent and inconsistent evidence. It helps identify weaknesses in explanations and rank plausible scenarios, including when the evidence does not settle the question.
THE IDEA
A Versatile Analytic Tool
The hypothesis-testing technique described here compares alternative explanations or scenarios. Evidence may rule out a hypothesis or expose problems with it. Even when several alternatives remain, the comparison helps assess their relative plausibility. The method emphasizes seeking inconsistent evidence so a favored explanation is not accepted merely because some facts fit it.
Hypothesis testing mirrors the Pros-Cons-and-Fixes technique. Consistent evidence equates to pros, while inconsistent evidence equates to cons. Just as cons represent the burden one must bear if one implements a particular option, so inconsistent evidence is the incongruity one must live with if one "buys" a particular hypothesis. Both techniques illuminate and focus our attention on the factors (pro and con) and the evidence (consistent and inconsistent) that are critical to our analysis.
The method can be used for diagnosis or forecasting. The source offers these forecasting examples:
- In the source’s historical example, will Russia's free-market economy evolve and prosper or lead to societal chaos? (We can hypothesize two alternative scenarios: the Russian market economy will fail or it will succeed.)
- Will the cost of city services grow in the next five years? (We can hypothesize three alternative scenarios: costs will decrease, remain the same, or increase.)
In both examples we look for significant current evidence relating to each alternative hypothesis, analyze the evidence in a hypothesis-testing matrix, and rank the hypotheses according to our assessment of their likelihood of occurring.
When to use it
Evaluating competing business strategies by formulating hypotheses about market reactions and collecting evidence.
Diagnosing a technical problem by hypothesizing possible causes and testing each with data.
Forecasting economic trends by setting alternative scenarios and analyzing current indicators.
Personal decision-making, such as choosing between career paths, by listing evidence for and against each option.
FROM THEORY TO EVERYDAY LIFE
In practice
Russia's Free-Market Economy
In the source’s historical example, analysts compare scenarios in which Russia’s market economy fails or succeeds. They organize the evidence available at the time in a matrix and assess which scenario it favors.
Cost of City Services
Hypothesize three alternative scenarios: costs will decrease, remain the same, or increase. Gather current evidence, analyze, and rank likelihood.
A MOMENT TO REFLECT
Put it to work.
Think of a decision you are currently facing. What hypotheses could you form about the outcome? What evidence would disprove each hypothesis?
Consider a past event. How could hypothesis testing have helped you evaluate alternative explanations more objectively?
Identify a common belief you hold. What evidence would be needed to disprove that belief, and how might you test it?
CONTINUE THE CONVERSATION
Source texts
- The Thinkers Toolkit by Morgan D Jones