Blogs from an Executive MBA: The Flaw of Averages

We Are All Wonder Women Co-founder Eugenie is currently undertaking an Executive MBA at the University of Cambridge. This is one is a series of blogs she is writing giving insight into some of her learning from the course which she hopes will help other Wonder Women at work.

I worked on a hydroelectric power plant project when I was a consultant. We were given a dense set of hydrological reports with which to understand how the projected changes in hydrology would potentially impact on biodiversity. The key information given to us was the projected average flow of water from the dam. This was a number that was fixated on.  However, after digging through 100s of pages of dense hydrological material I dug out the expected lowest and highest flows. And this was illuminating because it was 100% certain that at particular times of the year there would be no flow of water out of the dam. No water would have resulted in a massive impact to the ecology of the river downstream including fish kills. This is an example where the average wasn’t a useful piece of information for our decision-making.

I’ve just read an enlightening book called The Flaw of Averages by Sam Savage. It’s a fantastic book - I can’t recommend it highly enough. Savage points out how misinterpretation and misrepresentation of data in day-to-day decision making is huge. How there is a tendency to report on one number - the average and forget about any other information that may be relevant. Our bosses push us for one number - ‘How long will the project take?’, ‘What budget is needed to do x, y, or z?’, ‘How will our numbers be next year?’. The thing is that one number isn’t useful and it doesn’t tell us what we actually need to know. Instead we need to start talking about probabilities, uncertainties, and ranges - these are much more useful figures.

Some useful examples to help you make better decisions:

• Imagine you and your partner have an appointment tomorrow evening. You are going to drive together to the appointment from home and you need to leave together in the car at 6pm to get there on time. You are both at work tomorrow and each have an average commute time of 30 minutes. If you both depart at 5:30pm, what is the probability that you’ll leave the house at 6pm?
• You are walking through a woods and come across a river. You’ll need to ford the river to make it home by dinner time. The other option is to retrace your walk but that would take hours. So you decide to cross. You’ve been given information that the average depth of the river is 3ft. What information do you need to know where it’s safe to cross?

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