Two Mathematical Concepts That Will Help You Understand Business

Updated on

Page 10 of Jordan Ellenberg’s How Not To Be Wrong: The Power of Mathematical Thinking is an editor’s nightmare. Equations, inequality signs, fractions, algebra, calculus. If it’s true that sales decrease as the number of mathematical notations increase, then Ellenberg’s second book might be a dud. But fear not—Ellenberg is merely illustrating what a book about math should avoid. “No formal math beyond arithmetic will be required, though lots of math way beyond arithmetic will be explained.”

Two ideas stuck after I finished How Not To Be Wrong. The first is regression toward the mean. Suppose you’re an average golfer but you’ve been playing terribly. You take a lesson with the pro, and, lo and behold, you play better the next round. Credit to the pro, right? Maybe. But your golf game revolves around an average—a mean—and chances are that in the short term, you’ll regress toward that average after a string of awful or superb rounds.

Is performance in business also subject to regression toward the mean effects?

Ellenberg mentions a study conducted by Northwestern University professor of statistics Horace Secrist. Secrist tracked 49 department stores between 1920 and 1930 and discovered that the stores with the highest average profits performed steadily worse throughout the decade and vice versa. He concluded that businesses were “converging on mediocrity,” but there is no “mysterious mediocrity-loving force,” just the fact that in business, as in sports, performance depends on skill and luck. The firms with the fattest profits in 1920 were well managed, but they were also lucky. Ten years later, management remained superior, but luck ran out. See full article via

More on the book below.


How Not To Be Wrong – The Power of Mathematical Thinking by Jordan Ellenberg

How Not To Be Wrong – The Power of Mathematical Thinking – Description

The Freakonomics of math—a math-world superstar unveils the hidden beauty and logic of the world and puts its power in our hands

The math we learn in school can seem like a dull set of rules, laid down by the ancients and not to be questioned. In How Not To Be Wrong, Jordan Ellenberg shows us how terribly limiting this view is: Math isn’t confined to abstract incidents that never occur in real life, but rather touches everything we do—the whole world is shot through with it.

Math allows us to see the hidden structures underneath the messy and chaotic surface of our world. It’s a science of not being wrong, hammered out by centuries of hard work and argument. Armed with the tools of mathematics, we can see through to the true meaning of information we take for granted: How early should you get to the airport? What does “public opinion” really represent? Why do tall parents have shorter children? Who really won Florida in 2000? And how likely are you, really, to develop cancer?

How Not To Be Wrong presents the surprising revelations behind all of these questions and many more, using the mathematician’s method of analyzing life and exposing the hard-won insights of the academic community to the layman—minus the jargon. Ellenberg chases mathematical threads through a vast range of time and space, from the everyday to the cosmic, encountering, among other things, baseball, Reaganomics, daring lottery schemes, Voltaire, the replicability crisis in psychology, Italian Renaissance painting, artificial languages, the development of non-Euclidean geometry, the coming obesity apocalypse, Antonin Scalia’s views on crime and punishment, the psychology of slime molds, what Facebook can and can’t figure out about you, and the existence of God.

Ellenberg pulls from history as well as from the latest theoretical developments to provide those not trained in math with the knowledge they need. Math, as Ellenberg says, is “an atomic-powered prosthesis that you attach to your common sense, vastly multiplying its reach and strength.” With the tools of mathematics in hand, you can understand the world in a deeper, more meaningful way. How Not To Be Wrong will show you how.

Leave a Comment