Identify the risk of averages

- We often default to using average as the typical value of a category, but this is fraught with error and can frankly be deceiving. Let's consider a company department composed of five employees. The director of the department makes a lucrative annual salary of $500,000 while the employees on his team each make $40,000. If we simply take the average of $132,000, this team appears very well paid. In reality, one person is highly compensated while all the other four have mediocre salaries. This phenomenon is called the flaw of averages, and it pops up all over the place, in business, science and life, The average is misleading. It ignores the variability and distribution of data and can distort our perception of reality while leading to bad decisions. So what should we do about it? Relying on a single number is never an ideal scenario because most situations are nuanced. You should consider data variations over time, split into subcategories or as part of a whole. The median is…