Does you sample data accurately reflect the reality?

Let’s consider the following scenario, if one team is good enough to warrant beating another in 55 percent of its games, weaker team will nevertheless win a 7-game series about 4 times out of 10. And if the superior team could be expected to beat its opponent, on average, 2 out of each 3 times they meet, the inferior team will still win a 7-game series about once every 5 match-ups. There is really no way for sports leagues to change this. In the lopsided 2/3-probability case, for example, we’d have to play a series consisting of at minimum the best of 23 games to determine the winner with what is called statistical significance, meaning the weaker team would be crowned champion 5 percent or less of the time.

And in the case of one having only a 55–45 edge, the shortest statistically significant “world series” would be the best of 269 games, a tedious endeavor indeed! So sports playoff series can be fun and exciting, but being crowned “world champion” is not a very reliable indication that a team is actually the best one.

For example, it shows that if two companies compete head-to-head or two employees within a company compete, though there may be a winner and a loser each quarter or each year, to get a reliable answer regarding which company or which employee is superior by simply tallying who beats whom, you’d have to make the comparison over decades or centuries. If, for instance, employee A is truly superior and would in the long run win a performance comparison with employee B on 60 out of 100 occasions, in a simple best-of-5 series of comparisons the weaker employee will still win almost one-third of the time.

Bottom line? It is dangerous to judge ability by short-term results! 
 
Full Disclaimer: I am not a financial planner. The views expressed in this post are all mine and they may or may not suit your needs. Please do you own due diligence. I do not make money on any of the products suggested in this post. 

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