Mis-understood “AVERAGE”

Many people misunderstand “Average”, although it is frequently used in the daily life and various business situations.

When your test score is average of the class, you may think that you are in the “middle” in the class and/or that your score represents the overall performance of the class.

Either one is not necessarily accurate!

The reason of the mistake is that people tend to assume the data distribution in a “bell curve” shape, when you think about “average”.

Look at the following article from “Ministry of Internal affairs and communications of Japan” to show the distribution of household saving amount in Japan.

Average saving amount is17.39M JPY (=$173,900). This must be much larger than one can imagine.

The reason behind this is that small part of “very rich” people pull up the average, which almost 2/3 of all population is under the average!  Also, you may notice the largest group is “1M JPY or less”.

Image

“Median” is recommended to avoid this error. Median shows the number in the middle of the data distribution.

In this case, it is 10.23 M JPY (=$102,300).  Still high???

 

 

 

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