Beyond the High Score: Understanding the Pull of Average

Cricket has always been more than just a sport to me; it's a cherished pastime that evokes fond childhood memories of playing with my dad and younger brother in our backyard. Despite my deep affection for the game, I must admit that my skills have always been squarely average. When playing indoor matches with friends, I would often find myself contributing modestly, never quite standing out in the team.

There was a certain predictability to my performance in these friendly games. Typically, I ranked around the middle, reflecting the median skill level of our group. That is until an unexpected day when I experienced a significant deviation from this norm. During this particular match, everything I did on the cricket field seemed to work flawlessly. Every shot I played connected with a satisfying precision, and each decision I made turned out to be the right one. By the end of the match, I had notched up the second-highest score and bagged five wickets. It was an exhilarating experience, one that made me feel as though I had suddenly unlocked a new level of cricketing prowess.

This exceptional performance led me to question my previous assessment of my cricketing abilities. I started to wonder if this was a turning point, marking a transition from my usual mediocrity to newfound expertise. However, this notion was short-lived. In the games that followed, my performance returned to its usual average level. This fluctuation, from a one-time high back to my standard playing ability, served as a practical demonstration of a concept known as 'reversion to the mean.'

The principle of reversion to the mean is an intriguing one. It suggests that following an extreme outcome, whether it's exceptionally good or bad, the subsequent results tend to align more closely with the average. In other words, outliers, or performances that deviate significantly from the norm, are usually anomalies, not indicators of a new normal.

This concept gained popularity in the sports arena and was even linked to the so-called 'Sports Illustrated Jinx.' High-performing athletes like Serena Williams and Tom Brady, after being featured on the magazine's cover for their stellar performances, often experienced a dip in their performance. This led to a superstition among coaches and team managers, who began to see a feature on Sports Illustrated as an omen of bad luck. However, upon closer examination, it becomes evident that this was not a case of a jinx but rather an illustration of reversion to the mean. The extraordinary performances that landed these athletes on the cover were naturally followed by more average ones, aligning with their overall skill levels.

In the world of investments, the allure of outliers can often lead investors astray. This was particularly evident in the frenzy around cryptocurrencies and meme stocks. Investors, enticed by the promise of supernormal returns, would jump on the bandwagon, often ignoring the inevitability of reversion to the mean. I personally experienced this during the crypto boom in 2021 and 2022. By the time I realized the significant returns being made in crypto and decided to invest, the market was peaking. Two years down the line, my investments were sitting well below their purchase value, a classic case of the market correcting itself and returning to more typical levels.

Ignoring reversion to the mean can also make us susceptible to self-serving biases. We tend to attribute our above-average performances to skill and below-par performances to bad luck or external factors. This reluctance to acknowledge that our actual skill level might align with the mean, rather than with these occasional peaks, can lead to unrealistic expectations and decision-making.

Understanding reversion to the mean is crucial for a more balanced perspective on performance, whether in sports, business, or finance. It teaches us the value of long-term thinking and the importance of recognizing that luck, both good and bad, tends to even out over time. In practice, this means maintaining a long-term view in investments, being wary of trend-chasing, and evaluating performance in the context of overall trends rather than isolated incidents.

In reflecting on my cricketing experience, I'm reminded of the importance of understanding and accepting the average. It's a reminder that while we can and should strive for excellence, we should also be prepared for the normalizing force of average that underlies our endeavors. The question that arises is: how often do we mistake a stroke of luck for a permanent shift in ability or trend? Recognizing and embracing the concept of reversion to the mean not only grounds us in realism but also encourages us to focus on genuine skill improvement and long-term growth.