Regression to the mean
Regression to the Mean
Any phenomenon tends to regress to the mean after it experiences unusually large of small measurements. The mean is what "sets the standard." When there are many variables at play, extreme outcomes tend to be followed by more moderate ones (outcomes that "regress toward the mean").
Most occurrences involve a mix of luck and skill. We often fall prey to attributing causation to events that are, in fact, merely correlated. Your small business may have grown unusually fast this month due to regression to the mean. Things are likely to go back to the "standard," to put it simply. Sometimes new standards are set. Maybe your business is actually on a significant growth trajectory. But you cannot determine this only based on one month. If growth persists over time, for several months in a row, then you may conclude that a new standard has been set. If growth fluctuates, month over month, you may be experiencing regression to the mean.
One of the landmark examples of regression to the mean in our life, as Daniel Kahneman points out, is the height of children in our population. On average, short parents will have children who are taller than them, while tall parents will tend to have shorter children than them. Such phenomena can be attributed to regression to the mean: the height of the children tends to converge toward the "center" of the general human population height over time.
Regression to the mean can remind us that luck plays a relevant role in our existence. Sometimes, we can set new standards. The mean then shifts forward in the outcome distribution. The business coaching workshop you took may not be the real cause of your business growth (although it is difficult to tell). Regression to the mean may explain that.
Regression to the mean can help us dig a bit deeper into the events around us and their occurrence. It can make a difference in the way we interpret those events, and the "stories we tell ourselves." Ultimately, the stories we tell ourselves determine our life satisfaction and perceptions. Adding mental clarity and meta-knowledge to our toolbox can enhance the human experience.