Sam L. Savage discusses and signs The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty September 24, 2009

Despite all its promise, the Information Age is also laden with a dizzying array of technological, economic, and political uncertainties. While the electronic spreadsheet brought the power of business modeling to tens of millions, in so doing, it also paved the way for an epidemic of what Sam Savage calls the Flaw of Averages. This set of systematic errors occurs in all types of business and scientific endeavors when smart people focus on single average values in the face of uncertainty and risk, and it is an accessory to the economic catastrophe that culminated in 2008. The Flaw of Averages also ensures that plans based on averages of such uncertainties as customer demand, completion time, and interest rate are below projection, behind schedule, and beyond budget. In his book, Savage draws on recent breakthroughs in technology, along with new data structures and management protocols, to offer an approach to curing the Flaw of Averages.

“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.

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