Flaw of Averages Why We Underestimate Risk in the Face of Uncertainty

ISBN-10: 0471381977
ISBN-13: 9780471381976
Edition: 2009
List price: $18.99 Buy it from $3.00
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Description: Tomorrow's temperature, next week's sales, next month's stock price, next year's costs--these are all numbers we don't know yet. Everyday we base our personal and business plans on these kinds of uncertainties and as the financial collapse of Orange  More...

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Book details

List price: $18.99
Copyright year: 2009
Publisher: John Wiley & Sons, Incorporated
Publication date: 7/10/2009
Binding: Hardcover
Pages: 416
Size: 6.25" wide x 9.50" long x 1.50" tall
Weight: 1.342
Language: English

Tomorrow's temperature, next week's sales, next month's stock price, next year's costs--these are all numbers we don't know yet. Everyday we base our personal and business plans on these kinds of uncertainties and as the financial collapse of Orange County, Barings Bank and Long Term Capital show, we are often ill-equipped to deal effectively with this uncertainty. The problem is that even graduates of statistics courses don't understand the fundamental concepts of uncertainty. This book enables readers to understand the elements of "statistics" vital to our everyday dealings with uncertainty.

Preface
Acknowledgments
Introduction Connecting the Seat of the Intellect to the Seat of the Pants
Foundations
The Big Picture
The Flaw of Averages
The Fall of the Algebraic Curtain and Rise of the Flaw of Averages
Mitigating the Flaw of Averages
The Wright Brothers Versus the Wrong Brothers
The Most Important Instrument in the Cockpit
Five Basic MINDIes for Uncertainty
MINDIes Are to MINDs What HANDIes Are to HANDs
Mindle 1: Uncertainty Versus Risk
Mindle 2: An Uncertain Number Is a Shape
Mindle 3: Combinations of Uncertain Numbers
I Come to Bury Sigma, Not to Praise it
Mindle 4: Terri Dial and the Drunk in the Road
Who Was Jensen and Why Wasn't He Equal?
The Nuts and Bolts of the Strong Form of the Flaw of Averages
Mindle 5: Interrelated Uncertainties
Decisions and Information
Decision Trees
The Value of Information
Because There Isn't Anything Else
The Seven Deadly Sins of Averaging
The Seven Deadly Sins of Averaging
The Flaw of Extremes
Simpson's Paradox
The Scholtes Revenue Fallacy
Taking Credit for Chance Occurrences
Applications
The Flaw of Averages in Finance
Your Retirement Portfolio
The Birth of Portfolio Theory: The Age of Covariance
When Harry Met Bill(y)
Mindles for the Financial Planning Client
Options: Profiting from Uncertainty
When Fischer and Myron Met Bob: Option Theory
Prices, Probabilities, and Predictions
Real Finance
Holistic Versus Hole-istic
Real Portfolios at Shell
Real Options
Some Gratuitous Inflammatory Remarks on the Accounting Industry
The Flaw of Averages in Supply Chains
The DNA of Supply Chains
A Supply Chain of DNA
Cawlfield's Principle
The Flaw of Averages and Some Hot Button Issues
The Statistical Research Group of World War II
Probability and the War on Terror
The Flaw of Averages and Climate Change
The Flaw of Averages in Health Care
Sex and the Central Limit Theorem
Probability Management
Toward a Cure for the Flaw of Averages
The End of Statistics as You Were Taught It
Visualization
Interactive Simulation: A New Lightbulb
Scenario Libraries: The Power Grid
The Fundamental Identity of SLURP Algebra
Putting It into Practice
The CPO: Managing Probability Management
A Posthumous Visit by My Father
Red Word Glossary
Notes
About the Author
Index

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