Introduction to Probability Management

This course assumes that you are comfortable with Microsoft Excel, but you do not need training in statistics. If you wish to receive a verified certificate, you must download the free SIPmath™ Modeler Tools for Excel from nonprofit ProbabilityManagement.org, and it is recommended that you procure The Flaw of Averages: Why we Underestimate Risk in the Face of Uncertainty, John Wiley & Sons, either the 1st or 2nd Edition.

• How to recognize the Flaw of Averages, a set of systematic errors that occur when uncertainties are represented by single numbers, usually an average. It explains why so many projects are behind schedule, beyond budget, and below projection.

• The Arithmetic of Uncertainty , which performs calculations with uncertain inputs, resulting in uncertain outputs from which you can calculate true average outcomes and the chances of achieving specified goals.

• How to create Interactive Simulations which may be shared with any Excel user without the need for add-ins or macros. The approach is just as at home in R, Python or any programming environment that supports arrays.

Section 1: Probability Management Basics

• Post Traumatic Statistics Disorder (PTSD)
• The Flaw of Averages
• The Arithmetic of Uncertainty
• Limbic Analytics: Connecting the Seat of the Intellect to the Seat of the Pants
• The Hindu/Arabic Numerals of Uncertainty
• The Probability Power Grid
• Data Table Simulation in Excel

Section 2: The Five Mindles of Uncertainty

A MINDle lets you grasp something with your mind as a HANDle lets you grasp something with your hand. Understanding the arithmetic of uncertainty requires grasping five concepts beyond the operations of standard arithmetic. They are:

• Risk vs. Uncertainty
• Uncertain Numbers
• Combinations of Uncertainties
• Plans Based on Uncertainties
• Interrelated Uncertainties

Section 3: Introduction to Applications

• Nonlinear cost functions
• Building a Risk Model
• Estimating distributions from forecasts

Section 4: The Human Element

The PTSD picked up in a statistics class may be addressed through the following concepts:

• The permission to be uncertain
• Unambiguous Uncertainty
• Limbic Analytics