Regression to the mean is a common statistical phenomenon that can mislead us when we observe the real world. Learning to recognize when regression to the mean is at play can help leaders avoid misinterpreting data and seeing patterns that don’t exist One of the main functions of a leader is to minimize the number of bad judgements or decisions and to address the weak spots in the system. Learning about "Regression towards the mean" certainly helps them a lot. Why am I talking about this now? It's because of the recent test match between India and Australia. What has that got to do with this statistical concept? Ever since I read the book "Thinking Fast and Slow" by the Nobel prize-winning psychologist Daniel Kahneman, I have falling in love with this concept. This book which mainly deals about biases that cloud our reasoning - reveals that there is a whole set of logical errors that we commit in our daily lives based on our intuition and our brains do not deal with simple statistics very well. One of the errors which he explains in detail is the "Regression towards the mean" Let me explain what it is. The notion of regression to the mean was first worked out by Sir Francis Galton. The rule goes that, in any series with complex phenomena that are dependent on many variables, where chance is involved, and extreme outcomes tend to be followed by more moderate ones. So I bet that India after this famous and record breaking OTP numbers 492040840410 (Total:36, do not share this OTP with anyone) will obviously show a better result in the next innings. What do you attribute this increase to - towards the motivational speech of Ravi Shastri? Or the intervention of Saurav Ganguly or the increased application of all the batsmen or a combination of all? Taking the famous example from Daniel Kahneman's book - Kahneman recalls watching men’s ski jump, a discipline where the final score is a combination of two separate jumps. Aware of the regression to the mean, Kahneman was startled to hear the commentator’s predictions about the second jump. He writes: Norway had a great first jump; he will be tense, hoping to protect his lead and will probably do worse” or “Sweden had a bad first jump and now he knows he has nothing to lose and will be relaxed, which should help him do better. Kahneman points out that the commentator had noticed the regression to the mean and come up with a story for which there was no causal evidence. This is not to say that his story could not be true.
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AuthorVasudevan is a Leadership Mentor and an Executive coach. I run an online website geared towards helping creative entrepreneurs and future managers to build their dreams. Archives
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