Log In
Or create an account ->
Imperial Library
Home
About
News
Upload
Forum
Help
Login/SignUp
Index
Title Page
Copyright Page
Dedication
Preface
Acknowledgements
Introduction
Foundations
Applications
Probability Management
PART 1 - THE BIG PICTURE
CHAPTER 1 - The Flaw of Averages
Give Me a Number
Statisticians to the Rescue?
Red Lobster
Red River
Red Ink in Orange County
The Red Coats
Why Forecasts Are Always Wrong: A Problem of Dilbertian Proportion
CHAPTER 2 - The Fall of the Algebraic Curtain and Rise of the Flaw of Averages
Becoming a Management Scientist
Abandoning Management Science
Being Reborn as a Management Scientist
On the Road Again
From OR to PR and Back
CHAPTER 3 - Mitigating the Flaw of Averages
Probability Management
Doing for Probability What Edison Did for Electricity
The Consolidated Risk Statement
CHAPTER 4 - The Wright Brothers Versus the Wrong Brothers
A Wind Tunnel for Your Business Plan
CHAPTER 5 - The Most Important Instrument in the Cockpit
Learning About Learning
Flying on Instruments: When Gut Instinct Isn’t Enough
PART 2 - FIVE BASIC MINDLES FOR UNCERTAINTY
CHAPTER 6 - MINDles Are to MINDs What HANDles Are to HANDs
Steam Era Statistics: Things to Forget
CHAPTER 7 - Mindle 1: Uncertainty Versus Risk
Risk Is in the Eye of the Beholder
CHAPTER 8 - Mindle 2: An Uncertain Number Is a Shape
New Brunswick Hold ’Em
Uncertain Numbers: The Shape of Things to Come
The Weak Form of the Flaw of Averages
Give Me a Distribution
Black Swans
Some More Stuff on Distributions
CHAPTER 9 - Mindle 3: Combinations of Uncertain Numbers
A Portfolio of Spinners
So What?
Diversification: A Green Word for the CENTRAL LIMIT THEOREM
You Don’t Need to Know
The Power of Diversification
Poster Child for the CENTRAL LIMIT THEOREM
CHAPTER 10 - I Come to Bury SIGMA, Not to Praise it
Outputs of Simulations
Definition of SIGMA
CHAPTER 11 CHAPTER - Mindle 4: Terri Dial and the Drunk in the Road
The Strong Form Versus the Weak Form
It’s Too Hard to Change the Way People Do Business
Tugging at the Distribution
Evaluation of a Gas Well
The Cyclone Hits London
The Human Cyclone Meets the Financial Tsunami
CHAPTER 12 - Who Was Jensen and Why Wasn’t He Equal?
Spreadsheets with Uncertain Inputs
Options, Restrictions, Smiles, and Frowns
CHAPTER 13 - Mindle 5: Interrelated Uncertainties
COVARIANCE and CORRELATION are Red Words
Three Idealized Investments
Portfolios
Three Idealized Portfolios
A Mindle for Interrelated Uncertainties: The Scatter Plot
CORRELATE This!
PART 3 - DECISIONS AND INFORMATION
CHAPTER 14 - Decision Trees
Decision Trees
Giving Back
CHAPTER 15 - The Value of Information
The Complement of Uncertainty
What’s It Worth to You?
A Military Example
The Value of Obfuscation
Prototyping
PART 4 - THE SEVEN DEADLY SINS OF AVERAGING
CHAPTER 16 - The Seven Deadly Sins of Averaging
The List
CHAPTER 17 - The Flaw of Extremes
Sandbagging
Layers of Fat
Howard Wainer’s Most Dangerous Equation
CHAPTER 18 - Simpson’s Paradox
Kidney Stones
Baseball
CHAPTER 19 - The Scholtes Revenue Fallacy
Economics 101
CHAPTER 20 - Taking Credit for Chance Occurrences
Advertising Results
Pharmaceutical Effectiveness
An Age-Old Scam
PART 5 - THE FLAW OF AVERAGES IN FINANCE
CHAPTER 21 - Your Retirement Portfolio
Simulation for the Masses
Smoothing Things Out
CHAPTER 22 - The Birth of Portfolio Theory: The Age of Covariance
Risk Is the New Dimension
CHAPTER 23 - When Harry Met Bill(y)
A Simplified Model of the Relationships Among Securities
All Models Are Wrong
CHAPTER 24 - Mindles for the Financial Planning Client
Bessemer Trust
Interactive Simulation at Bessemer
Financial Engines
CHAPTER 25 - Options: Profiting from Uncertainty
Stock Options
Implied Volatility, the Uncertainty Gauge
CHAPTER 26 - When Fischer and Myron Met Bob: Option Theory
Risk-Neutral Pricing
Publication
Long-Term Capital Management: The Perfect Storm
Skin in the Game
CHAPTER 27 - Prices, Probabilities, and Predictions
Futures and Probabilities
Options and Uncertainty
Prediction Markets
Predicting Terror Attacks
DARPA Gets into and out of the Picture
Predictomania
When Does This Stuff Work?
PART 6 - REAL FINANCE
CHAPTER 28 - Holistic Versus Hole-istic
A Serendipitous Sequence of Events
We Win Some and Lose Some
Our Ideas See the Light of Day
The Decision Forest
CHAPTER 29 - Real Portfolios at Shell
The Planets Were Aligned
The Model Survives a Hurricane and Management Changes
CHAPTER 30 - Real Options
Keeping Sailplanes Aloft
Case Study: Restoring a ’64 Porsche
Supplying Thrust in Podunk
Meanwhile Back at Wells Fargo
CHAPTER 31 - Some Gratuitous Inflammatory Remarks on the Accounting Industry
FASB and the Weak Form of the Flaw of Averages
FASB and the Strong Form of the Flaw of Averages
Some Constructive Criticism for the Accounting Industry
PART 7 - THE FLAW OF AVERAGES IN SUPPLY CHAINS
CHAPTER 32 - The DNA of Supply Chains
Just Plain Nuts
When Less Is More
The Bullwhip Effect
The Beer Game
CHAPTER 33 - A Supply Chain of DNA
A Supply Chain at Genentech
Forecasting Done Right
An Interactive Dashboard
CHAPTER 34 - Cawlfield’s Principle
From Remedial Math to Chemical Engineer
A Problem at Olin
The General Principle
PART 8 - THE FLAW OF AVERAGES AND SOME HOT BUTTON ISSUES
CHAPTER 35 - The Statistical Research Group of World War II
German Tanks
Protective Armor on Bombers
Half a Battleship
CHAPTER 36 - Probability and the War on Terror
The Magic Bullet
The False Positive Problem
There Is Nothing to Cheer but Fear Itself
Rumsfeld Asks the Right Question
CHAPTER 37 - The Flaw of Averages and Climate Change
Why the Earth’s Average Temperature Is Falling
The Bad News
The Good News
Free Markets and the Tragedy of the Commons
Learning the Controls
CHAPTER 38 - The Flaw of Averages in Health Care
Treating the Average Patient
Medicine Meets Mathematics
Unintended Consequences
I’m Not Dead
CHAPTER 39 - Sex and the Central Limit Theorem
The Results of Diversifying Your Portfolio of X Chromosomes
Which Tail Are You Looking At?
The Myth of the Myth of the Math Gender Gap
On Rethinking Eugenics
PART 9 - TOWARD A CURE FOR THE FLAW OF AVERAGES
CHAPTER 40 - The End of Statistics as You Were Taught It
Galton’s Dice
The Bad Boys of Statistics
CHAPTER 41 - Visualization
Visual Statistics
Toward a Theory of Irrational Expectation
CHAPTER 42 - Interactive Simulation: A New Lightbulb
The Return of a Pioneer
Polymorphic
Tip of the Iceberg
CHAPTER 43 - Scenario Libraries: The Power Grid
Modular Risk Models and Age of the Scatter Plot
The Subprime Mortgage Fiasco
CHAPTER 44 - The Fundamental Identity of SLURP Algebra
CHAPTER 45 - Putting It into Practice
The DIST Distribution String
Certification and Auditing
Software Implementation
The Outlook
CHAPTER 46 - The CPO: Managing Probability Management
The CPO Versus the CRO
In the Land of the Averages, the Man with the Wrong Distribution Is King
Probability Management at Merck & Co.
Calibrating Your CPO
To Blow or Not to Blow the Whistle, That Is the Question
CHAPTER 47 - A Posthumous Visit by My Father
Red Word Glossary
Notes
About the Author
Index
← Prev
Back
Next →
← Prev
Back
Next →