A spoken monologue explaining how the law of averages must be paired with large sample sizes (“law of high numbers”) to produce predictable outcomes. The speaker gives examples from casinos, insurance, grocery and department stores, and business activity to argue that individual outcomes are unpredictable while aggregate behavior (thousands of people or repeated actions) becomes statistical and reliable for planning and pricing.
All right, let's take a look at the law of averages and how they really work. The law of averages. Basically, it's the law of averages combined with the law of high numbers. See, the key is the law of averages only works if you put high numbers with it. See, law of averages work like this. If you go into a casino in Las Vegas, they know however many people walk through the door, if one person walks through the door, they don't know what's going to happen because the law of averages doesn't kick you off. They have two to three to four people, they don't know what's going to happen. But if they have a thousand people walk in high numbers, then they have statistical evidence to know exactly how much money is going to come per thousand people. So if first thing they do when they open up a casino, that's why they make them some flamboyant and they have so many decorations and this thing because they want to get. They need the crowds to make it work. They need the crowds, same thing as a grocery store. Now also up here, they know if this goes from 1,000 to 2,003, 5, 10, or 100,000, it's going to be predictable. And the larger the number, the more it's down to a science. Same thing with the. Let's just use insurance companies, not just in life insurance, but like property casualty, things like that. They know if they have one or two policies, small number, they got a problem. The numbers can't work. The actuarial tables don't get in, don't work. But if they have thousands, let's just say, like, let's talk about life insurance. Let's say age 31, they sell a policy to somebody and they sell one policy of age 30, they don't know what that's going to turn into. But if they turn age 31, they sell 1,000 policies or 10,000 policies, they know exactly what their payouts are going to be in terms of how many out of a thousand, how many out of 10,000 actually die. And they're going to have to pay. So that's how they establish their rates. That's how they actuari. The actuarial tables are all based off large numbers. And so casino grocery stores is not just everything works that way. Let's say grocery stores, your department stores, your big box stores, they know of every thousand people who walk in the door that they know exactly how much money they're going to make. Now, they don't know everybody's not going to buy the same Amount. Some will go in there, and out of 1,000 people, they know some will buy nothing. Some will buy like one thing and maybe spend $10. But they know somebody out of that thousand is going to buy like $300 worth of worth of stuff. Somebody's going to buy, you know, maybe more than that, but they're going to have a combination of all this stuff that's going to give them a yield of a certain figure, and it's going to be pretty much the same thing as if the next day another thousand people walk through that store. So that's how they figure their pay structure, their pricing, what they can afford for everything. It all gears off of. And that's why profit in these locations, casinos, grocery stores, big box stores, all come from outlets because they know if they put an outlet in a location, depending on the population, how many thousands of people will come through in a day and how much profit they can make. It's all down to a science. And what science is, it is the law of averages, the law of high numbers. It goes over to this thing that I'll probably talk about in the Wydell Academy many, many times, and that is this principle. Man in the masses. So I'm going to repeat this real quick. Man in the masses is totally predictable, totally man as an individual, unpredictable. So if you have a business where you're only dealing with individuals, very frustrating, unpredictable, inconsistent, you stay constantly frustrated. However, if you deal with a store, you know, that could be a country store, where somebody wanders in every now and then. But if you've got a huge department store and you got hundreds of people, Whole Foods or whatever it is, and you got people pouring through the doors, you know, it's totally predictable. It's going to be a very satisfying business because you know what you're going to get. You got your little country store out there in the boonies. You don't know how many people are going to walk in an individual day and what they're going to be buying just by buying. You know, the occasional guy drops by and he gets a pack of gum, and then you've been in there for three hours, you sold a pack of gum. So for the law of averages to work, you've got to have the law of high numbers working with you. Now, how this pays off for you goes into the thing about can you win? See, this relates to can you win? Well, if you do enough activity, if you do large numbers of activity, not the one or two, see, one or two people, and you have a good product and you're in the right market, you know you're going to essentially guarantee your chances of success. But if you go out there and have the occasional. See, that's why we always tell people if you get into the 10s and 20s, your result starts to get predictable. You get into a hundreds, two hundreds, you, you know you're going to have success. But if you get into the small activity and you get into like ones and twos, who knows what you're going to have? You know, you're just like everybody. You can't predict results of small numbers. It's got to have large. They call it large sample. It's like polling if who knows who's going to win any election. If you're pollsters go out there and just ask two people in a parking lot or one person in a parking lot so and so is going to win. How do you know? Well, I just asked Bob, that's what he said he's voting for. What does that mean? Nothing. So it works in all phases of life. If you want, you know, the law of averages that have made other people, other businesses, success, successful in other down true time in your industry, in your arena, those things will work for you if you put the large numbers to it. So always combine the law of averages with the law of high numbers. Got to do them together to make them work. But when you do, you know they're going to work for you just like they work with everybody else.
