Book description
A must-read for anyone who makes business decisions that have a major
financial impact.
As the recent collapse on Wall Street shows, we are often
ill-equipped to deal with uncertainty and risk. Yet every day we base
our personal and business plans on uncertainties, whether they be next
month's sales, next year's costs, or tomorrow's stock price. In The
Flaw of Averages, Sam Savageknown for his creative exposition
of difficult subjects describes common avoidable mistakes in
assessing risk in the face of uncertainty. Along the way, he shows why
plans based on average assumptions are wrong, on average, in areas as
diverse as healthcare, accounting, the War on Terror, and climate
change. In his chapter on Sex and the Central Limit Theorem, he
bravely grasps the literary third rail of gender differences.
Instead of statistical jargon, Savage presents complex concepts in
plain English. In addition, a tightly integrated web site contains
numerous animations and simulations to further connect the seat of the
reader's intellect to the seat of their pants.
The Flaw of Averages typically results when someone plugs a
single number into a spreadsheet to represent an uncertain future
quantity. Savage finishes the book with a discussion of the emerging
field of Probability Management, which cures this problem though a new
technology that can pack thousands of numbers into a single
spreadsheet cell.
Praise for The Flaw of Averages
“Statistical uncertainties are pervasive in decisions we make every
day in business, government, and our personal lives. Sam Savage's
lively and engaging book gives any interested reader the insight and
the tools to deal effectively with those uncertainties. I highly
recommend The Flaw of Averages.”
-William J. Perry,
Former U. S. Secretary of Defense
“Enterprise analysis under uncertainty has long been an academic
ideal. . . . In this profound and entertaining book, Professor Savage
shows how to make all this practical, practicable, and
comprehensible.”
-Harry Markowitz, Nobel Laureate in
Economics
Sam L. Savage is a Consulting Professor of
Management Science and Engineering at Stanford University, and a
Fellow of the Judge Business School at the University of Cambridge.
