Monday, September 22, 2014

I say weights and you say probabilities...


Just to be clear: weights and probabilities are not the same concept:
  • Probabilities express the proportion of certainty allocated to each value. Consequently, the proportions all add up to 1.0 like slices in a pie.
  • Weights, on the other hand, express relative strength... as such there is no need to have proportionality among weights unless it's convenient.
We hear these terms used interchangeably... weights when we mean proportional uncertainty; probabilities when we mean relative weights. With context, we usually know what is really meant, but not always.

In marketing and sales, we often hear about probable sales (ok) and weighted market values (ok), but then somehow the weighted market value becomes the win probability... not likely true

And, we see similar usage on the risk register where weights and probabilities get mixed.
  • It's ok to say impacts are weighted by some binary scale (High = 4 x Medium; Medium = 2 x Low)
  • It's even ok to say risks are weighted by their probabilities: risk impact x risk probability
  • But, it's not ok to an 80% probability of this happening and a 30% probability of the opposite happening. If these are all part of the same pie, they may be weighted by a ratio of 8 to 3 for some parameter, but they are not 8 to 3 in probability: 80 + 30 > 1

But wait: the world will not end if these errors are made. On the other hand, let's wipe out ignorance!



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