3 ms·

Your current customer base is just a sample of your total market, for example. Next year’s (larger) customer base will be slightly closer to the whole set (so d

• wodenokoto 7y ago
  So the point is that the current customer base is a skewed sample of the theoretical customer population. Therefore we shouldn’t look at the current customer mean profit to predict what would happen to profits if we doubled the customer base.
  • tomnipotent 7y ago
    It's not about the doubling, it's about how the distribution changes as you gather more data and get closer to the actual mean (e.g. if you had EVERY possible customer ever, like cable companies). Take Tesla, for example. Its first customers were enthusiasts, but the mean of that group is not the mean of all current Tesla customers - they would look very different, and had Tesla optimized for the latter we'd be looking at a very different outcome.
  • kqr 7y ago
    Exactly. These summaries are often used for prediction, which means historic data is used as a sample of the same distribution as future data. Even when comparing two different historical data sets you have to be careful: if you're doing anything that resembles hypothesis testing (i.e. trying to figure out if something you changed made a difference) you're not really comparing two historical data sets -- you're trying to compare the underlying distributions from which the historical data sets were drawn, but hoping that the historical data are representative samples from those.