Normal ain't What it Used to Be
Seth Godin made an interesting point : we tend to assume all kinds of data has a “normal distribution”, the famous Bell curve shape, even when it doesn’t. It’s become the default option in most people’s heads: the one thing that sticks from statistics taught at school. The problem, of course, is that lots of things don’t follow a Bell curve. As Steven Strogatz writes in The Joy of x : “Curiously, these types of distributions are barely mentioned in the elementary statistics textbooks, and when they are, they’re usually trotted out as pathological specimens. It’s outrageous.” That bias explains why the Bell curve is called the “normal” curve. But the real world is different. A flood or earthquake can cause a huge spike in damage in a particular area, raising the cost to insurance companies. Stock market can have massive moves on a particular day, not a steady movement. The number of deaths in wars follows the same pattern: an outlier can be off the charts (like ...