Don't make single point forecasts

Last updated on September 10, 2020

Decisions based on the average value will be wrong on average. A single number is only one possible outcome. Look at the whole distribution to trade-off costs to make decisions.Do not cross a river that’s 5 feet deep on average.

This is true in general, but especially prominent in the case of fat-tailed variables where the mean value, which is usually the default single-point, will rarely be seen.

And where do we find such variables? In complex (Complexity) places.

References:

Flaw of averages
On Single Point Forecasts for Fat-Tailed Variables, Nassim Nicholas Taleb, Yaneer Bar-Yam, Pasquale Cirillo

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