Large numbers

It has been reported that Google's CFO induced the (gasp) "law of large numbers" to explain why the company's growth will inevitably slow.  (See e.g. John Battelle's blog.) Such is the state of statistical education.

I think he meant to say "regression to the mean".

A typical use of the law of large numbers is to justify using random samples to make generalized statements about some larger population.  It says that (under some assumptions) the uncertainty of these statements decrease with increasing sample size.  I can't see the connection with declining revenues.

Comments

[Mike Anderson]

Neither sound bite seems very convincing. I'd be more likely to believe that growth is slowing because major segments of Google's market are becoming saturated (graph 1-e^(-t/b) for example), and that future growth will depend on products and services that open new segments or "raise the ceiling" by creating new demand.

[John]

Google is attempting to off-set its losses by trying the law of large numbers in its algorithm. The interesting thing would be to see, how Google fits it in it's algorithm.