Any statistics professor will tell you there’s no such thing as the “law of averages”, but as today’s Washington Times points out there is a “Flaw of Averages”, which is also the title of a new book by Sam L. Savage, a consulting professor of management science and engineering at Stanford University and a fellow of the Judge Business School at the University of Cambridge.

The problem with predictions based on averages? Risk and uncertainty aren’t factored into plans.

“In everyday life,” said Mr. Savage, “the flaw of averages ensures that plans based on average customer demand, average completion time, average interest rate and other uncertainties are below projection, behind schedule and beyond budget.”

When people use a single number, usually a historical average, to predict the future, they invite systematic errors and generate unintended consequences, mostly negative…

Probability, risk, and uncertainty can be difficult concepts for people to grasp. The best plans take a range of outcomes into account, with each assigned a probability of occurrence (of course as humans we tend to poor estimation of probabilities.) The process can start with the simple questions of (1) What are our assumptions and (2) What if we are wrong?

Keep all of this in mind the next time you’re tempted to predict the future based on a poll taken in the past

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