New Book Review: "Why Can't You Just Give Me the Number?"
Recently posted book review for Why Can't You Just Give Me the Number?: An Executive's Guide to Using Probabilistic Thinking to Manage Risk and to Make Better Decisions, by Patrick Leach, Probabilistic Publishing, 2010, reposted here:
If all executives and managers had backgrounds in statistics, this book would not need to have been written. Leach presents introductory probabilistic thinking to manage risk and to make better decisions masterfully, beginning by comparing the skills of professional poker players and business professionals. Knowing probabilities just gets professional poker players in the game; in order to win, additional skills are needed. "Ironically, the reverse is often true in business – the players have the skills but do not understand the odds. Most executives and managers are intelligent and highly skilled individuals with a good sense for the industries in which they operate. However, competitors are also led by bright and capable people. Some are certainly more capable than others, but most companies employ talented and intelligent managers and executives. In business, having the skills just gets you into the game."
As the author explains, "this book is not designed to give you the ins and outs of statistical methods, or show you how to calculate the standard deviation of a set of data, or enable you to create efficient charts for your portfolio of opportunities. This is not an instruction manual for hands-on statistical analysis; there are a number of excellent books of that type already on the market. This is an overview of the world of probabilistic methodology – or rather, the view from a senior manager's perspective. We'll occasionally work with numbers and terminology, but the idea is not to turn you into a statistician or an economic model builder. My purpose is (1) to convince you of the importance of using probabilistic thinking as part of your decision making process, and (2) to give you the foundation you'll need to interpret the results of statistical analyses appropriately."
Based on this dual purpose, Leach hits the bulls-eye. After making the case that all value generated by business executives comes, directly or indirectly, from how they manage uncertainty, Leach discusses why many of the past methods that dealt with uncertainty are inadequate today, and how the sensitivity analysis "tornado" chart, the decision tree, and Monte Carlo simulation should be used together (i.e. not in isolation) to gain insight into uncertainty. Subsequent chapters discuss subjects such as risk-neutrality, risk aversion, human biases and weaknesses, contingent probabilities, advantages and disadvantages of single values that represent one another rather than ranges, dependencies between projects, near-critical-path tasks, right-skewed distributions, the MAIMS (Money Allocated is Money Spent) effect, the decision making process, the value of information, the value of control, optimization, the efficient frontier, and statistical quirks and traps.
This reviewer especially enjoyed chapter 5 ("Improving the Odds of Success"), chapter 6 ("It's All in Your Head"), chapter 7 ("Contingent Probabilities"), chapter 8 ("Which Number Do You Want?"), and chapter 10 ("Late and Over Budget – Project Management Issues"). The simple line graphs and diagrams throughout the text are very effective at getting the author's point across, reminiscent of "Waltzing with Bears: Managing Risk on Software Projects" by Tom DeMarco and Timothy Lister (see my review), and the quotes at the start of each chapter, some of which this reviewer is already familiar, provide excellent preludes to the content of accompanying discussions. For example, the fourth chapter begins with the following Persian proverb: "He who knows not, and knows not that he knows not, is a fool – shun him. He who knows not, and knows that he knows not, is a child – teach him. He who knows, and knows not that he knows, is asleep – wake him. He who knows, and knows that he knows, is wise – follow him."