Paperback version Includes a foreword by Harry Markowitz, Nobel Laureate in economics. Originally published in hardback in 2009. Includes bibliographical references (pages 371-381) and index.

A must-read for anyone who makes business decisions that have a major financial impact. As the recent collapse on Wall Street shows, we are often ill-equipped to deal with uncertainty and risk. Yet every day we base our personal and business plans on uncertainties, whether they be next month's sales, next year's costs, or tomorrow's stock price. In The Flaw of Averages, Sam Savage, known for his creative exposition of difficult subjects, describes common avoidable mistakes in assessing risk in the face of uncertainty. Along the way, he shows why plans based on average assumptions are wrong, on average, in areas as diverse as healthcare, accounting, the War on Terror, and climate change. In his chapter on Sex and the Central Limit Theorem, he bravely grasps the literary third rail of gender differences. Machine generated contents note: Foundations -- pt. 1 The Big Picture -- ch. 1 The Flaw of Averages -- ch. 2 The Fall of the Algebraic Curtain and Rise of the Flaw of Averages -- ch. 3 Mitigating the Flaw of Averages -- ch. 4 The Wright Brothers Versus the Wrong Brothers -- ch. 5 The Most Important Instrument in the Cockpit -- pt. 2 Five Basic MINDIes for Uncertainty -- ch. 6 MINDIes Are to MINDs What HANDIes Are to HANDs -- ch. 7 Mindle 1: Uncertainty Versus Risk -- ch. 8 Mindle 2: An Uncertain Number Is a Shape -- ch. 9 Mindle 3: Combinations of Uncertain Numbers -- ch. 10 I Come to Bury SIGMA, Not to Praise it -- ch. 11 Mindle 4: Terri Dial and the Drunk in the Road -- ch. 12 Who Was Jensen and Why Wasn't He Equal? -- ch. 13 Mindle 5: Interrelated Uncertainties -- pt. 3 Decisions and Information -- ch. 14 Decision Trees -- ch. 15 The Value of Information -- pt. 4 The Seven Deadly Sins of Averaging -- ch. 16 The Seven Deadly Sins of Averaging -- ch. 17 The Flaw of Extremes -- Contents note continued: ch. 18 Simpson's Paradox -- ch. 19 The Scholtes Revenue Fallacy -- ch. 20 Taking Credit for Chance Occurrences -- Applications -- pt. 5 The Flaw of Averages in Finance -- ch. 21 Your Retirement Portfolio -- ch. 22 The Birth of Portfolio Theory: The Age of Covariance -- ch. 23 When Harry Met Bill(y) -- ch. 24 Mindles for the Financial Planning Client -- ch. 25 Options: Profiting from Uncertainty -- ch. 26 When Fischer and Myron Met Bob: Option Theory -- ch. 27 Prices, Probabilities, and Predictions -- pt. 6 Real Finance -- ch. 28 Holistic Versus Hole-istic -- ch. 29 Real Portfolios at Shell -- ch. 30 Real Options -- ch. 31 Some Gratuitous Inflammatory Remarks on the Accounting Industry -- pt. 7 The Flaw of Averages in Supply Chains -- ch. 32 The DNA of Supply Chains -- ch. 33 A Supply Chain of DNA -- ch. 34 Cawlfield's Principle -- pt. 8 The Flaw of Averages and Some Hot Button Issues -- ch. 35 The Statistical Research Group of World War II -- Contents note continued: ch. 36 Probability and the War on Terror -- ch. 37 The Flaw of Averages and Climate Change -- ch. 38 The Flaw of Averages in Health Care -- ch. 39 Sex and the Central Limit Theorem -- Probability Management -- pt. 9 Toward a Cure for the Flaw of Averages -- ch. 40 The End of Statistics as You Were Taught It -- ch. 41 Visualization -- ch. 42 Interactive Simulation: A New Lightbulb -- ch. 43 Scenario Libraries: The Power Grid -- ch. 44 The Fundamental Identity of SLURP Algebra -- ch. 45 Putting It into Practice -- ch. 46 The CPO: Managing Probability Management -- ch. 47 A Posthumous Visit by My Father.