Posts tagged averages

Where You Cannot Generalize from Knowledge of Parts

Medium, Taleb, probability, averages, information, complexity, non-linearity, generalisation, volatility

Consider the following as a rule. Whenever you have nonlinearity, the average doesn’t matter anymore. Hence:
The more nonlinearity in the response, the less informational the average.
For instance, your benefit from drinking water would be linear if ten glasses of water were ten times as good as one single glass. If that is not the case, then necessarily the average water consumption matters less than something else that we will call “unevenness”, or volatility, or inequality in consumption. Say your average daily consumption needs to be one liter a day and I gave you ten liters one day and none for the remaining nine days, for an average of one liter a day. Odds are you won’t survive. You want your quantity of water to be as evenly distributed as possible. Within the day, you do not need to consume the same amount water every minute, but at the scale of the day, you want maximal evenness.
From an informational standpoint, someone who tells you “We will supply you with one liter of water liter day on average” is not conveying much information at all; there needs to be a second dimension, the variations around such an average. You are quite certain that you will die of thirst if his average comes from a cluster of a hundred liters every hundred days.

via https://medium.com/@nntaleb/where-you-cannot-generalize-from-knowledge-of-parts-continuation-to-the-minority-rule-ce96ca3c5739