Bound Quote by Charlie Munger
“There is bound to be a regression toward the mean.”
About This Quote
Source Speech: Annual Shareholder Meeting, Berkshire Hathaway, 1995
Statistical tendency for extreme values to move closer to average over time.
In simple terms: Extreme results tend to normalize.
Key Takeaway
Expect moderation after extremes.
Themes
statistics
probability
investment
risk management
Mood
cautious
analytical
Type
financial
educational
When to use this quote
- stock market performance
- business forecasts
- personal finance
- performance reviews
Key Concepts
regression to the mean
random variation
Questions to Reflect On
- How do you guard against overreacting to outliers?
- When might a trend persist despite regression?
A Different Perspective
Assumes underlying distribution is stable, which may not hold.
![“They [Mc Donalds] take people and give them a first job, which enables them to get a second job. They do a very good job of educating troubled young people to be good citizens and they're probably more successful than charter schools.” quote by Charlie Munger](https://sms4smile.com/quotes/img-quotes/a55/charlie-munger-458_be-good_they-mc-donalds-take-people-and-give-the_41809.jpg)
![“It is way less certain to be a wonderful business in the future. The threat is alternative mediums of information. Every newspaper is scrambling to parlay their existing advantage into dominance on the Internet. But it is way less sure [that this will occur] than the certainty 20 years ago that…” quote by Charlie Munger](https://sms4smile.com/quotes/img-quotes/8d0/charlie-munger-458_advantage_it-is-way-less-certain-to-be-a-wonderful_59627.jpg)
