Making predictions about whether certain things will happen can be more accurate if you keep the concept of the base rate in mind. The base rate is a statistical foundation that other statistics rely on. For instance, think about a big taxi company with 20 percent yellow cabs and 80 percent red cabs. This means the base rate for yellow taxi cabs is 20 percent, and for red cabs, it’s 80 percent. So, when you order a cab and want to guess its color, you can use these base rates to make a fairly accurate prediction.

However, people often forget about the base rate when making predictions, a phenomenon known as base-rate neglect. This happens because we tend to focus on what we expect to see rather than what is most likely. For example, if you’ve seen several red cabs in a row, you might start to think it’s likely the next one will be yellow. But in reality, no matter how many cabs of either color you’ve seen, the probability that the next cab will be red is still around 80 percent, if you consider the base rate.

Base-rate neglect is just one of the common mistakes we make when working with statistics. We also tend to forget that everything tends to regress to the mean, which means that situations have an average status, and variations from that average will eventually move back toward the average.

For example, if a football striker usually scores five goals per month but scores ten goals in September, her coach might be thrilled. However, if she then goes back to scoring around five goals per month for the rest of the year, her coach might criticize her for not maintaining her “hot streak.” In reality, the striker is simply regressing to the mean, and the criticism isn’t justified.