How Factor Analysis and PCA Actually Differ
A deeper look beyond the textbook distinction that’s been confusing practitioners for decades The Problem We All Face Picture this: You’re sitting in a committee meeting, and someone suggests using “factor analysis to reduce dimensions” while another colleague insists “PCA will identify the underlying factors.” Both sound reasonable. Both seem to accomplish similar goals. Yet something feels… off. If you’ve found yourself nodding along while internally questioning whether these methods are really as different as your statistics textbook claimed, you’re not alone. The standard explanation—“FA finds latent factors, PCA reduces dimensions”—is technically correct but practically incomplete. It’s like saying “cars move people, planes fly people”—true, but missing the nuanced reality of when and why you’d choose one over the other. Choosing the wrong method can lead to misleading conclusions about underlying mechanisms or inefficient models that fail in production. ...