No. 239 · Evidence · Statistics and Probability
Standard Deviation
An average tells you the centre; the spread tells you how much to trust it.
In the Almanac
“Pearson names the spread”, 1893 · “AlliedSignal”, 1994
Both stories in full, three ways to use it and where it misleads.
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Questions
What is Standard Deviation?
Standard Deviation tells you how tightly data cluster around the average. Karl Pearson coined the term in 1893, and Six Sigma, adopted by Larry Bossidy at AlliedSignal, used it to cut variation and defects.
How do you use Standard Deviation?
Two things can share an average yet differ wildly in reliability. Look at the spread when planning commutes, comparing investments or building habits, and leave buffers for it. Just remember it can understate risk in lopsided, rare-event situations.
When does Standard Deviation matter?
Standard Deviation is one of the 68 mental models for evidence, the situations where you ask: Is this really true? Within that, it belongs to “Reading the numbers”, alongside Base Rate Fallacy, Bayes’ Theorem and Central Limit Theorem.
What is an example of Standard Deviation?
Two stories show it at work: Pearson names the spread (1893) and AlliedSignal (1994). Both are told in full in The Mental Models Daily Almanac, which has two stories for each of its 365 models.
Which mental models are related to Standard Deviation?
Variance, Fat-Tailed Distributions and Margin of Safety. Standard Deviation itself comes from statistics and probability.