Have you ever felt that statistics used in everyday life are purposely designed to deceive you? As Black Sheep, we see the world differently, and it’s not our imagination. Companies and governments have been using statistics to manipulate people for centuries. And it continues today, despite past blunders and knowing better.
I couldn’t see it myself until one case changed everything, fully awakening my inner Black Sheep. It all started in a classroom at Duke’s Fuqua School of Business in 2015, delving into the accounting case study for Delta Air Lines.
On April 1, 1993, Delta Air Lines abruptly changed its depreciation assumptions for its airplanes. Before 1993, Delta depreciated a new airplane over fifteen years with a 10 percent residual value. After 1993, Delta decided to appreciate its aircraft over twenty years with a 5 percent residual value. This change had a huge effect on the financial statements of a capital-intensive industry like airlines, where airplanes are expensive, and depreciation is a significant operating expense affecting profitability.
So what changed from March 31, 1993, to April 1, 1993, causing such a dramatic shift in Delta’s financial statements? Nothing substantial—except Delta’s $1.2 billion loss over the previous three years. Delta had an incentive to reduce its depreciation expense and boost its apparent profitability. By adjusting the depreciation method, Delta reduced its depreciation expense by 22 percent, translating to $690 million less in depreciation expense per year. With just a footnote in the annual report, Delta magically improved its financial appearance.
Why is this important to you? Because you probably own stock in Delta through a pension or 401k retirement fund. Learning about the Delta case during my MBA, I initially assumed accounting was strict and rule-based, incapable of manipulation. This case study shattered that assumption. I realized that numbers could be “bent” to the will of their wielder. Delta Air Lines legally massaged depreciation numbers to increase their profit by $690 million in one year.
This revelation made me rethink how financial reports could be altered so dramatically with such ease. What else is being manipulated? Curious, I started investigating other deceptive practices in data. What I found was astonishing: crime statistics, medical test accuracy, jury decisions, election results, and marketing claims—all manipulated.
Dive deeper into these themes and learn how to sharpen your critical thinking skills by reading more in Think Like a Black Sheep. Discover how to navigate through biases and uncover the truth hidden in plain sight. Start your journey today and see the world with clarity and purpose. Read more in Think Like a Black Sheep and unlock the power of critical thinking.
