Library Required reading Reading the numbers
You Don't Have an Average Business
Nassim Nicholas Taleb's The Black Swan is about rare events with huge consequences, and about the world where a single observation can outweigh all the rest. Customer revenue lives in that world.
Nassim Nicholas Taleb · The Black Swan · 2007
What it is
It’s a book about the events that matter most, and that the usual methods are worst at seeing. Taleb defines the Black Swan in the prologue by three attributes, then sums them up:
“rarity, extreme impact, and retrospective (though not prospective) predictability.” Prologue, “On the Plumage of Birds”
The first edition came out in 2007. The second, in 2010, added a new section, “On Robustness and Fragility.”
What you’ll take from it
You’ll take away his two countries. In Mediocristan, no single observation changes the total much. One unusually heavy person barely moves the average weight of a thousand people. In Extremistan, one observation can dominate everything. Put a billionaire among the same thousand and their average wealth stops describing any of them. He put it this way in a 2008 essay:
“In Extremistan, exceptions can be everything (they will eventually, in time, represent everything).” Taleb, Edge, September 14, 2008
Where it shows up in your numbers
Most marketing math assumes you’re in Mediocristan. There’s an average customer, an average deal, and a cost per acquisition compared against an average value. But customer revenue lives in Extremistan. A small share of your customers carries most of the value, and the average describes almost nobody.
That’s why it pays to read your results by tier instead of by average. It’s also why a campaign that lowers your cost per customer can still be losing you the customers that matter.
Next on the shelf Wilhelm Wundt, Principles of Physiological Psychology