Doing calculations, in silence or speak out loud

Correlation and causality are two important terms in statistics that are often confused with each other. In this text, the difference between the two is explained with understandable examples and related to the business consulting industry. Keep in mind that math is an important aspect of the case interview.The Principle of CorrelationCorrelation describes the degree of relationship between two variables. When two variables correlate, it means that changes in one variable are accompanied by changes in the other variable. A positive correlation occurs when the values of both variables increase or decrease together. An example of a positive correlation is the relationship between the number of hours spent preparing for an exam and the score achieved. As a rule, the more time one invests, the better the exam score.A negative correlation occurs when the values behave in opposite ways, that is, when the value of one variable increases, the value of the other variable decreases, and vice versa. As an example, there may be a negative correlation between the number of hours one spends watching TV and physical fitness. The more time one spends in front of the TV, the less time one has for physical activities, which can lead to lower fitness.However, it is important to understand that correlation alone is not sufficient to conclude causality.The Principle of CausalityCausality means that a change in one variable is a direct cause of a change in another variable. In other words, one variable causes a change in another variable. An example often used to explain the difference between correlation and causality is the relationship between the number of ice cream sales and the number of sunburns. There is a positive correlation between these two variables because more ice cream is sold on sunny days and more people also get sunburned. However, it would be wrong to assume that ice cream consumption causes sunburns. In reality, the common cause of both is sun exposure. On sunny days, people buy more ice cream and are also at higher risk of sunburn. This example illustrates that correlation does not automatically indicate causation.Correlation and Causality in Management ConsultingIn consulting, understanding correlation and causality can play a critical role. When consultants analyze data to help companies or organizations, it is important that they draw the right conclusions and not make false assumptions. Usually it is important to decide which factors should be qualitative and/or quantitative analyzed.Let's say a company finds that there is a strong correlation between the use of a particular marketing strategy and sales growth. The company might be tempted to assume that the marketing strategy is directly responsible for sales growth and therefore continue to invest heavily in that strategy. However, it could be that the correlation only indicates that both variables are influenced by another, as yet unknown, cause. To confirm causality, further research would be required, such as experiments or bigger control groups to test the direct impact of marketing strategy on sales. Possible causes could also be pricing, a change in the product portfolio or the changing size of the market.Overall, it is important to understand that correlation and causality are different concepts. Correlation simply describes the relationship between two variables, while causality implies a cause-and-effect relationship. Just because two variables correlate does not automatically mean that one variable is the cause of the change in the other variable. Further investigation and evidence is needed to conclude causality.

Math plays a big role in case interviews because it helps you solve business problems logically and in a structured way. It’s not about applying complex formulas; it’s about working quickly with numbers and finding practical solutions. Since you won’t have a calculator and can only use pen and paper, knowing effective calculation methods is key. These skills show off your analytical mindset and can make you stand out from other candidates. Why Mental Math is a Big PlusIn case interviews, being able to handle basic calculations in your head is a huge advantage. It saves time and makes you appear more flexible and confident. It’s not about avoiding writing things down entirely, it’s rather about quickly grasping the results. The goal is to get a fast overview and deliver precise answers. Imagine calculating revenue and profit for multiple products – if you can confidently do these calculations in your head, you’re already a step ahead. Working with Rounded NumbersIn case interviews, you’ll often see “rounded” numbers like 300,000 or 4,000,000. Working with large numbers can feel intimidating, but a few simple tricks can make it much easier.💡 Quick Trick: Cutting ZerosLet’s say you’re calculating the revenue for a product that a company sells at $32 per unit, with 25,000 units sold annually. The calculation is 32 × 25,000. Instead of writing all those zeros, break it into simpler steps:Calculate 32 × 25 first, which is easier than 32 × 25,000.Then, just add the three zeros from “25,000” to the result.To quickly solve 32 × 25, you can think of 25 as ¼ × 100:32 × ¼ = 88 × 100 = 800So, 32 × 25 is 800, making 32 × 25,000 equal to 800,000. This method saves time and reduces the chance of misplacing zeros. Adding and Subtracting with UnitsLarge numbers, like 250 million or 300 million, might seem challenging at first glance. A useful technique is to work with units like thousands (K), millions (M), billions (B), and trillions (T). This simplifies addition or subtraction because you don’t have to write out or imagine all the zeros.💡 Quick Trick: Adding Large NumbersSuppose you need to add 250 million, 300 million, and 150 million. Instead of writing each number fully, just add the leading numbers and keep the unit:250 + 300 + 150 = 700, then add the “million” unit."The result is 700 million. This approach is quicker and reduces errors since you’re focusing only on the main numbers, not all the extra zeros. Multiplication and “Clean Numbers”Multiplication is common in case interviews, and many numbers used are “clean numbers”, meaning they have helpful properties that make calculations easier. For example, 25 is a “clean” number because it’s ¼ × 100, which simplifies large multiplications.💡 Quick Trick #1: Fast-Math Multiplication:The Fast-Math Method is a technique for simplifying complex multiplications by breaking them into easier steps. It’s based on the idea that you can halve one number and double the other without changing the result, thanks to the commutative property of multiplication. This keeps the final product the same but often makes the math easier. Here’s an example:Original calculation: 160 × 350Halve 160: 160 ÷ 2 = 80Double 350: 350 × 2 = 700Multiply the results: 80 × 700 = 56,000The result is the same as 160 × 350 but without lengthy calculations. This method is especially handy in case interviews, allowing for quick, error-free calculations.💡 Quick Trick #2: Reordering Multiplication Factors:Another helpful technique is rearranging terms to make the multiplication easier. Imagine you need to calculate 125 × 2.5 × 4. You can rearrange like this:Start with 125 × 4 = 500.Then, 500 × 2.5 = 1,250.The answer is 1,250. Reordering simplifies the calculation. You could also do 2.5 × 4 = 10, then 125 × 10 = 1,250. This flexibility lets you choose the easiest order for each case. Quick Calculations for Percentage GrowthLet’s say a company grows 4% per year. Calculating this over multiple years can often be simplified by ignoring compound interest and estimating growth. This is especially helpful for shorter time periods and moderate growth rates.Example: Estimating Percentage GrowthIf a company’s revenue is $400 million and it grows at 4% annually for six years, you can estimate the growth like this: 4% × 6 = 24%, which is roughly one-quarter. So the revenue grows by about 25%, or around $100 million, bringing it to about $500 million after six years. This method gives a quick estimate for growth impact over several years. The Net Present Value (NPV) MethodThe Net Present Value (NPV) method is a common approach to calculate the current value of a future investment. It helps determine today’s value of expected cash flows by discounting future payments. A positive NPV indicates a worthwhile investment, as future returns exceed the initial cost.💡 Quick Trick: Rule of 72The “Rule of 72” is a tool for estimating the doubling time of an investment—how long it’ll take to double in value. The Rule of 72 uses the exponential growth formula and can be applied when a rate of return (or growth rate) is known.Simply divide 72 by the annual interest rate (in percent) to estimate the doubling time. For example, if the growth rate is 6% annually, the investment doubles in about 12 years (72 ÷ 6 = 12).This quick estimation helps estimate the future value of an investment without needing to apply the exact NPV formula. Since it’s an approximation, it’s great for quick decisions or rough estimates but less suited for precise calculations.Example: NPV of a Real Estate ProjectA real estate company is considering a project that will sell apartments for $250 million in six years. What’s the current value of this investment if they expect a 12% return annually? Using the Rule of 72, an investment with a 12% growth rate doubles in about six years (72 ÷ 12 = 6). So, today’s value is roughly half the future value, or $125 million. This means the company should invest no more than $125 million to achieve a 12% return. ConclusionMath and quick calculations are essential in case interviews to help you stand out from other candidates. The methods and examples here allow you to tackle common calculations efficiently and accurately. From working with rounded numbers to using the Fast-Math Method, these techniques make you faster and more confident with numbers. Practice these methods before your interview to be flexible and confident, showcasing your math skills effectively.👉 Elevate your math skills to the next level by practicing with our Mental Math Tool!