Discovered by Francis Galton (Regression Towards Mediocrity in Hereditary Stature, 1886) and set out for decision makers by Daniel Kahneman (Thinking, Fast and Slow, 2011).
Expects extreme results to be followed by less extreme ones, because part of any extreme is luck, and luck does not repeat on schedule.
When to reach for it
When reading a standout quarter, a slump, a hot hire, or the result of an intervention made right after an extreme.
How it runs
- Identify the extreme result and the measure behind it.
- Estimate how much of the measure is skill and how much is noise.
- Shrink predictions toward the average in proportion to the noise.
- Give an intervention no credit or blame for a return to normal.
- Apply the same discount to personal highs and lows.
Where it sits in SOLVE eX
Go to the source
- Regression Towards Mediocrity in Hereditary Stature, Journal of the Anthropological Institute 15, 1886
- Thinking, Fast and Slow, chapter 17, 2011