Being Surprised by Regression Toward the Mean

We are predisposed to discount the role of luck in our lives—to believe that successes are earned and failures deserved. We misinterpret the temporary as permanent and invent theories to explain noise. We overreact when the unexpected happens, and are too quick to make the unexpected the new expected. The key to understanding regression toward the mean is to look behind the data—to recognize that when we see something remarkable, luck was most likely involved and, so, the underlying phenomenon is not as remarkable as it seems. Not to be confused with the gambler’s fallacy where good luck is followed by bad luck, regression toward the mean states that extremely good luck is generally followed by less extreme luck. The Sports Illustrated jinx is nothing more than this. Whenever there is uncertainty, people often make flawed decisions due to an insufficient appreciation of regression toward the mean.