Why Volume Is Your Ally in Decision-Making
“In the long run, the house always wins.”
It’s a quote made famous in casinos, but it holds powerful truth for investors, entrepreneurs, and executives. Behind that saying lies a foundational concept in probability and decision-making: the Law of Large Numbers (LLN).
What Is the Law of Large Numbers?
The Law of Large Numbers is a statistical principle stating that as the number of trials or observations increases, the average of the results will converge toward the expected value. In simpler terms: more data = more accuracy.
Whether you’re flipping a coin, evaluating marketing performance, or investing in a new product line, the more times you observe an outcome, the more reliable your understanding of the underlying probability becomes.
Formal Definition:
If you repeat a random process enough times under consistent conditions, the average result of those outcomes will tend to move closer to the theoretical expected value.
Why It Matters to Executives
1. Decisions Backed by Volume Become More Predictable
Small sample sizes are noisy. A customer service survey with 10 responses might show 100% satisfaction. But with 1,000 responses, your results will smooth out and likely reflect a more accurate picture. LLN reminds us to resist early conclusions from small data sets.
Use case:
In real estate development, early data on tenant interest from a small pre-leasing sample may be misleading. Waiting for more lease applications improves predictive insight on market appetite.
2. Avoid Overweighting Anecdotes
Executives often fall prey to “n=1” errors—making decisions based on a single case or conversation. LLN teaches us to discount emotional pull from one-off stories and rely instead on trends from sufficient volume.
Leadership implication:
A single disgruntled client shouldn’t overhaul your entire customer journey. But if 500 of 1,000 clients say the same thing, it’s a pattern—not an outlier.
3. Success Is Often a Numbers Game
From sales to venture capital, from scientific research to product launches—volume creates reliability. The best fund managers, for example, know they don’t need every bet to win—just enough over time to let the average work in their favour.
Example:
Peter Lynch of Fidelity Magellan fame knew that not every stock pick would succeed. But by backing a broad set of high-potential ideas, the winners more than made up for the losers.
Applications in Strategy and Operations
A. Hiring and Talent
One great hire out of five isn’t enough. LLN encourages building robust hiring pipelines, tracking results over dozens or hundreds of hires, and calibrating your recruitment process over time.
B. Marketing and Growth Experiments
Don’t judge a campaign by the first week. Look at large-scale campaign performance to understand true return on investment.
C. Product Iteration
Instead of relying on feedback from a few beta users, seek statistically significant user feedback before committing to a product direction.
Common Misinterpretations and Traps
- The Law of Small Numbers Fallacy
People often mistakenly apply LLN to small sample sizes—assuming a few observations will reflect broader truth. It’s not just wrong; it’s dangerous for strategic decisions. - The Gambler’s Fallacy
The belief that past random outcomes influence future ones (“it’s due to happen”) is not the same as LLN. The LLN doesn’t guarantee balance in the short run, only over the long run. - Ignoring Variability
While averages stabilize, variance doesn’t disappear. In finance, knowing the mean return is useful, but understanding volatility is essential too.
Strategic Takeaways
- Track performance over time and across volume. Don’t jump to conclusions from early signals.
- Calibrate your mental models to discount outliers and focus on reliable averages.
- Design systems with built-in sample size—A/B testing, market trials, and multi-year benchmarks.
- Expect consistency only from scale. The bigger the dataset, the clearer the signal.
Final Thought
The Law of Large Numbers is more than a statistical artifact—it’s a mental lens for patience, discipline, and probabilistic reasoning. As a leader, using LLN helps you move from emotional reactions to grounded decisions.
In business, you can’t control every outcome. But if you play the game often enough, and wisely enough, the averages will begin to favour you.
Missed out on the over all series?
Murray Slatter
Strategy, Growth, and Transformation Consultant: Book time to meet with me here!
