Mistaking Average with Random in Business and Life

Interestingly enough, people often mistake the concept of average and random. More precisely, people mistake the difference between something having variance and something being random.

What do these distinctions mean and why do they matter?

When something has variance, this means that it varies in the amount it produces. EVERYTHING has variance, even a bottle making machine. That is because we live in a world that is not perfect. Sometimes the machine breaks down, sometimes it gets too hot for production, etc.

For example, a machine might produce the following number of bottles in consecutive 4 days: 790, 811, 850, 740.

Now, inexperienced people will say mistake the above numbers to the process being random. This will disincentivize them from putting effort into making the machine better.

Once the ideal of straight line production (or straight line profit taking in a business) is not reached, many people dismiss business as a "random" event and give up on trying to improve it.

What is the alternative?

The alternative is to expect variance but not to see it as a hinderance. The solution to the production levels: 790, 811, 850, 740 is not 860,860,860,860 it is 878,925,1011,912.

Account for variances, create a baseline by creating a meaningful way to check average and constantly improve.