My daughter is studying logic in college. This course, which defines the principles of valid inference and correct reasoning, does not come easy to a person who wants to defy logic. So, my daughter has hired a tutor to help her keep up her grade point average. While you might chuckle at my daughter's lack of skill in recognizing logic, you might ask yourself if you've ever felt betrayed by an advertiser's promises, let alone a politician's rhetoric.

You might also wonder about your sense of logic when it comes to your portfolio. Although there was no way to predict whether a business was too large to fail or not during this economic downturn, investors (myself included) sometimes believe what they want to believe, rather than look closely at the logic behind some corporate statements.

If you never studied logic, how can you tell if someone is skewing the facts to make a situation appear appealing? Math and logic are important subjects for any investor, so if you did not take a class in logic, then pick up a logic primer to learn more about how you can safeguard yourself and your portfolio against flawed statistics and statements.

Marilyn vos Savant wrote one such book in 1996. The Power of Logical Thinking has been called “provocative,” because the author uses politics to make her points. But, the book is easy to read and to understand its principles (it carries the subtitle, “Easy lessons in the art of reasoning...and hard facts about its absence in our lives”). Marilyn now maintains a question-and-answer Web site and continues to write for Parade, a Sunday magazine that now is available online.

One list provided in her book provides questions that an individual might ask to better understand someone's statements or to learn more about the background to any numbers offered publicly. This list is found on page 106 and 107, in the chapter, “How Numbers and Statistics Can Mislead.”

For example, some questions you should ask when presented with information include queries that any researcher might ask when seeking documents that might support or refute a scholarly project. These questions include:

• If the presenter generated the information and, if not, who or what was the original source (original sources are much more valuable than re-generated materials).
  
  
• Is that original source reputable, and did the source generate a conclusion as well as provide facts and figures?
  
  
• Does the presenter, no matter how credible, have an agenda? While you may not be able to discern whether a presenter is consciously or unconsciously biased, you can learn more about the presenter to understand his or her position. For instance, if a newspaper seems to present only the 'facts,' yet supports Democrats or Republicans year after year in elections, you can presume that paper leans either right or left based upon that support. This bias can affect how the paper 'reports' facts.

Don't allow the introduction of the media into this conversation throw you off – as a journalist who has spent years in the newspaper business, I can tell you that bias is not reserved for a news media's editorial or opinion pages. Every media company has a bias, and every corporation has an agenda. To ignore this fact is foolish, and your willingness to ignore this fact can affect your bottom line when you choose a company for your portfolio.

In your pursuit for 'truth,' you also might ask if the context under scrutiny is presented in its entirety or if only seemingly 'relevant' information is included. You may have seen where, at times, bloggers or news media may take a quote out of context and use it as a talking point. You might search for the original speech or story and learn how that comment fits into the overall context. This exercise may show an entirely different perspective on that singular comment. This exercise also applies to any figures drawn from an overall study of a company's profile. View the whole profile, not just numbers pulled from that profile to make a writer's point, otherwise you might enter an unwise investment decision.

Also, having more knowledge about the subject in question can affect your understanding of that subject. For example, how much did you know about the health care system in this country before the recent health care debates? Did you derive your information from gossip, political rhetoric or media sound bytes? Or, did you conduct your research through books and through reading a variety of arguments on both sides? While the former research methods may provide research material, the latter method can provide facts and figures. But, be wary of accepting those 'facts and figures' at face value.

The ability to come to your own conclusion rather than adopt another person's conclusion is a matter of self development. To trust your own conclusion, however, is another matter, and one that takes experience with trusting your own instincts and knowledge. And, the more you know about any given situation when you go to make a decision (such as investing in a company), the more responsibility you carry in making that decision. You cannot blame someone else for failure when you make a decision based upon your own knowledge.

A few points in von Savant's list pertain to numbers contained in statistical studies or polls. While most of her information refers to politics, you also can apply the following to any projections that an analyst or that a company might make about the future:

• Can past or present figures accurately predict future figures? Or are they inherently self-limiting?
  
  
• For what purpose was a particular study done?
  
  
• Do the results seem to agree with what that particular organization would have liked to prove?
  
  
• If people were surveyed, would they be afraid of making a politically incorrect statement to a stranger at the door, on the phone, or in the mail?

While I did not cover every point that the author made in her book, the general gist is here. Her final note in that book's chapter states, “It's becoming increasingly clear that every number must be viewed with caution.” (author's emphasis). And, as my daughter stated, “I'm beginning to learn that everything is flawed.”

I just hope my daughter doesn't begin to apply logic to my life. It's going to hurt when I fall off that pedestal.

Until Later,
Linda Goin