Central Tendency

In nature we have variation. Things tend to spread out across a range. Some measures we have of variation are the standard deviation, variance, range, so on.

But nature also shows us another side. Things vary but they also clump. There tends to be more of one kind of species and less of another. We have thousands of different species of monkeys, but a few tend to be more common than others. We have We have millions of different kinds of birds, but some are more common than others. People vary in age between 0 and 130 years, yet those aged between 35 and 75 tend to predominate. And so on. I don't know whether my figures are right but you get the idea. There's only one platypus for example.

We have several measures to help us measure and describe central tendency: mean, median, mode, kurtosis, skewness, etc. These tell us how clumpy some aspect of nature is and how it clumps.

It's key for entrepreneurs to understand simple statistical concepts and how to apply them. They need to know them to understand their own business' and to be able to understand how other are using them or misusing them. For example, when some business proclaims, "We are Number One in customer satisfaction," you might like to know what that means. What measures are they using? Where did they get their data? how did they analyze it? And so on and so forth.

Chances are the proclaimer doesn't care about all of this. He or she just wants to shoot it's mouth off. Don't you just hate that? We get a lot of people shooting their mouths off to.

When I lived in Bloomington, Indiana, two radio stations proclaimed they were Bloomington's most listened to radio station. I said, "How can this be?" Turned out one was the most listened to in the city, the other county-wide.

A business in Madison, Wisconsin, proclaimed it had a "99.9% customer satisfaction rating. That meant that they had to have surveyed at least 1,000 customers and 999 of them had to have indicated some sort of satisfaction. But what does that mean? They were extremely satisfied? They weren't extremely dissatisfied? How were the data collected? What scales did they use? Hard to know. Pretty much they were blowing smoke.

Entrepreneurship is the lifeblood of my professional activities. For my books, go to amazon.com and plug in my name and you'll come up with both mysteries, The Case of the Kearney Music School Murders and No Stop on Red. Neither is ready yet for the Kindle.

Characteristics of Data

Entrepreneurs need to know data. Knowing data is key to an entrepreneur. We need to be able to tell how much cash we have on hand, what our profit is, the average number of days it takes to get paid, what our average revenue is, and on and on. We need to be able to analyze data on our market, data on our company, and so on and so forth.

Two characteristics describe any set of data, whether it is a listing of batting averages in major league baseball, the amount of rainfall per day in the Amazon, or the height and weight of some group of people.

These two characteristics are dispersion and central tendency. Dispersion refers to data's tendency to spread out along some continuum. Height in humans runs from 3+ feet or so to 8+ feet. Yearly batting averages in baseball run from 000 to 1000. Temperatures measured in degrees F run from -100 or so to over 200. Measurements vary, but data tends to spread out within some range.

Central tendency refers to data's tendency to clump around some figure, often called an "average." A baseball player's batting average is really the average of all the averages he compiles in all the games he plays in. A hitter can hit from 000 to 1000 in a game. If he gets 5 hits in 5 at bats, he gets to "bat a thousand" or 1000. If he's hitless he bats 000. Average those and you get some figure usually between 200 and 300 though good hitters usually average in the 300 to 350 range. Terrible hitters can average under 100. Average temperatures are available on the weather in exhausting detail but are probably 75 degrees or so F on a pleasant day in the summer.

You can look in any statistics book or on line and you'll get lots of detail about measures of central tendency and dispersion. Sufficient for now to realize that an entrepreneur needs to know about this stuff and be comfortable talking about it and using it. If you don't know what I'm talking about, you should get education.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

The Average

You hear the term "average" mentioned day in day out. The "average" guy. "Average rainfall on this date." A baseball players "average." A car gets an "average" of 35.3 miles per gallon.

The term "average" is a cultural rather than a statistical term. A tomato is technically a fruit but it's regarded culturally as a vegetable. David Stockman, head of something in the Reagan administration referred to ketchup as a vegetable.

Usually, the average is used as a measure of central tendency. Central tendency is the tendency of things to bunch together. Generally we mean by "average" the arithmetic mean, the total of all observations divided by the number of observations.

If Tiger Woods in a given golf round has 10 rounds of 4, 5 rounds of 3, and 3 rounds of 5, he has a total score of 70 and an average of 3.89 shots (rounding to the 100s place) per hole. How much does this tell you about how well Woods actually played that day? Not much, but it's one piece of data.

You have to be careful because what "average" you should use depends on the kind of information you have. An "average" man doesn't mean much because you can't really calculate an average. You can have average height or average weight but not an average man.

There's also different kinds of averages.

When you say, "He's just an average Joe," you usually mean "He's just a typical guy." That can get us into trouble.

For more on this go to Wikipedia or go to any statistics text book. Or you can look at some of my earlier blogs.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Central Tendency and how to measure it

Central Tendency is the flipside of variation. The term refers to the characterstics of data to "clump" together around some middle value, often called the "average." This later term is a cultural term, not statistical. It applies to one of three typical statistical measures of central tendency: the arithetic mean, all values in a distribution divided by the number of observations, most often called the average; the mode, or most common score (i.e. if you have 5 observations {3,5,5,4,2} the mode=5); and the median, the score that divides the upper half from the bottom half. To figure this latter measure for 50 observations, rank them from high to low and the median will be half-way been observations #25 and #26. You can find a more complete explanation on QuickMBA.com.

If this appeals to you, post a comment. All my professional activities are entrepreneurial. Check my writing blog: www.kearneymusicschoolmurders.com and www.yourstopforrealestate.com/blog.