News from Academy

Authors

  • Sam L. Savage Stanford University – California – US; Executive Director on Probability Management.org United States

Keywords:

probability management, uncertainty

Abstract

Curing the Flaw of Averages by Re-thinking Uncertainty

Such uncertainties drive decision making at all levels of business and government, where they are often replaced with single “average” best guesses. Unfortunately this leads to a set of systematic mathematical errors known collectively as the flaw of averages. This misconception helps explain why so many things are behind schedule, below projection, and beyond budget.

Author Biography

  • Sam L. Savage, Stanford University – California – US; Executive Director on Probability Management.org United States

    After receiving his Ph.D. in the field of computer science, from Yale University in 1973, Sam spent a year at General Motors Research Laboratory, and then joined the Management Science faculty of the University of Chicago Graduate School of Business. Here he discovered that an Algebraic Curtain separated the bulk of his management students from management science. In 1985 Dr. Savage led the development of a software package called What'sBest!®, that coupled Linear Programming to Lotus 1-2-3. The package won PC Magazine's Technical Excellence Award in 1986. Sam has worked ever since to bring analytical tools to managers in an algebra free environment. In 1990, Sam moved to Stanford, where he teaches Management Science in the Engineering School. He has also been a Visiting Professor at Northwestern University’s Kellogg School and the Naval Postgraduate School in Monterrey.

    Recent publications include articles on The Flaw of Averages in the San Jose Mercury News, and Harvard Business Review, and Accounting for Uncertainty, in the Journal of Portfolio Management. Dr. Savage consults and lectures extensively to business and government agencies and has served as an expert witness. Harry Markowitz, Nobel Laureate in Economics, has called Dr. Savage’s book and software, INSIGHT.xla, "a Must Read.” Sam’s Monte Carlo simulation package for Excel, XLSim® has also been well received. This package includes Dr. Savage’s tutorial on Understanding Uncertainty, with a foreword by Peter L. Bernstein, author of Against the Gods.

    Dr. Savage is founder and president of AnalyCorp Inc., a firm that develops executive education programs and software for improving business analysis.

    Research Interests

    • Fields of Specialization:
      Embedding analytical techniques in spreadsheets, data bases and the OLAP environment, Risk Minimization in Petroleum Exploration, Stochastic Modeling in Accounting and the Law. 
    • Interests:
      Dr. Savage's primary focus is on removing what he refers to as the 'Algebraic Curtain' separating Management from Management Science. This activity lies in the domain of Informational Design.

      His experience in consulting and expert testimony have led him to address the disparity between the way risk and uncertainty are treated in industry, and how the subjects are taught in the typical statistics course. Two recent publications in this area include “The Flaw of Averages” in the Harvard Business Review, and “Accounting for Uncertainty” in the Journal of Portfolio Management.

      Current areas of interest include: 
      Stochastic modeling in Accounting and the Law 
      Stochastic Information Systems to effectively communicate risk and uncertainty between various parts of an organization. 
      Risk minimization in petroleum exploration, by extending portfolio optimization techniques from finance.

      Although Savage received his Ph.D. in the area of Combinatorial Optimization, he has also done work in Combinatorial Obfuscation, developing the SHMUZZLE(tm) Puzzle , a tessellation based jigsaw puzzle inspired by M.C. Escher.

References

ProbabilityManagement.org (2013). The flaw of averages in project completion: why everything is behind schedule. Retrieved September 9, 2014, from http://probabilitymanagement.org/library/Behind%20Schedule.xlsx

Downloads

Published

2022-05-20

Issue

Vol. 2 No. 2 (2014): The Journal of Modern Project Management

Section

Articles-JMPM

License

Copyright (c) 2022 Sam L. Savage

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

How to Cite

News from Academy. (2022). The Journal of Modern Project Management, 2(2). https://journalmodernpm.com/manuscript/index.php/jmpm/article/view/152

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