The law of truly large numbers says that a large enough collection of opportunities makes even extremely unlikely events likely to occur somewhere. It explains why rarity alone does not prove that an unusual outcome was unforeseeable. section 4.7
When “six sigma” becomes an excuse
An investment expected to return $50,000 instead returns $5,000, six standard deviations away. Calling this a six-sigma event may sound like an explanation, but the model itself may have used the wrong mean or standard deviation. A large collection of possible events makes some extreme outcomes likely, while flawed assumptions can make them appear even more surprising. section 4.7
Figure 4.11 An investor blames an unlikely six-sigma event for a misfortune.
Use the illustration to examine how an investor attributes a business misfortune to an unlikely six-sigma event. section 4.7
