This post introduces a recent essay on the danger of using averages for making decisions or evaluating performance

Mathematically, the average tells us the arithmetic mean; it gives a sense for where the middle lies within a group or between extremes. But averages, like stereotypes, are incomplete and dangerous as a basis for decision making. Rather, when making decisions or evaluating performance, embrace your natural curiosity and dig in. 

Move past the false shortcuts offered by averages.  Embrace variability. 

Forest management expert Dr. Barry Shiver once told me that the motto of intensive forestry is, “identify variability…then exploit it!” We add value by investing in the best soils and highest performing trees on one end, and through dealing quickly with mortality and disease at the other end. When it comes to managing or buying an asset, we want to understand both the forest and the trees.  

Some might argue that averaging and generalizing facilitates analysis and the testing of ideas about how things work. Okay, this makes sense. “On average”, timberland in markets with lots of mills have higher values. On average, taller people are more able to dunk a basketball. But averages do not determine value, performance or skill. They offer a general starting point.

Click here to read the essay.