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Probability Management - A Cure for the Flaw of Averages

Editor's Note: This event was originally scheduled for Sept 18 at a different location.

Dr. Sam L. Savage, Executive Director of ProbabilityManagement.org, Author of The Flaw of Averages: Why we Underestimate Risk in the Face of Uncertainty, Adjunct Professor of Civil and Environmental Engineering, Stanford University. The discipline of probability management leverages big data to let organizations estimate the chances of good and bad outcomes of all sorts, to cure the Flaw of Averages.

See for example how PG&E is applying it to roll up operational risk

The Flaw of Averages states that plans based “average” assumptions are wrong on average. That is, the substitution of single number estimates for uncertainties leads to systematic correctable errors. Yet most plans are still crafted around average demands, prices, completion times, etc., rendering them often worse than useless. This is because quantification of uncertainty has required specialized technology and statistical training.

SIPs go a long way toward curing this affliction by providing unambiguous representations of uncertainties as arrays of simulated or historical data. 501(c)(3) nonprofit, ProbabilityManagement.org, has developed the open SIPmath standard for communicating these arrays along with metadata. It is compatible with virtually any software platform including native Excel and has broad implications in risk management and regulation. Communities of SIPmath practice have grown up at Chevron, Lockheed Martin, PG&E, within the military and in government finance.

Dr. Savage will demonstrate live interactive models in numerous areas of application using Excel files available to all attendees. No prior understating of statistics is assumed, but for those with extensive training in the subject, this presentation will attempt to repair the damage.

Thursday, 09/19/19


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San Jose Hilton

300 Almaden Blvd
San Jose, CA 95110