Informational Design - Dr. Sam Savage

Just Published! - Insight 2.0
Decision Making with Insight
This suite of Excel add-ins for quantitative analysis, along with its accompanying tutorial documentation, provides Monte Carlo simulation, decision trees, queuing simulations, optimization, Markov chains, and forecasting.

"INSIGHT 2.0 is a must read..."
	Harry Markowitz Nobel Laureate in Economics

"It's like taking candy from a statistician."
	Stephen Cole Senior VP, Eucid Corp.

Simple yet powerful Monte Carlo Simulation for Microsoft Excel.
Upward compatible from SIM.xla (the Monte Carlo module in INSIGHT.xla).

!	Increases Monte Carlo trials from 5,000 to one Million
!	Increases outputs and parameters from 5 to over 200
!	HTML Tutorial by Sam Savage on Understanding Uncertainty Through Simulation
!	Several New Distribution Functions Including
	!	Multivariate Normal
	!	Shuffling for Permutations
	!	Row-wise and Column-wise resampling
	!	Roger Myerson's Generalized Lognormal
!	FREEZE/THAW commands make simulation models portable
!	Animated Common Graphs

"It's like taking candy from a statistician."
	Stephen Cole Senior VP, Eucid Corp.

Simple yet powerful Monte Carlo Simulation for Microsoft Excel.
Upward compatible from SIM.xla (the Monte Carlo module in INSIGHT.xla).

!	Increases Monte Carlo trials from 5,000 to one Million
!	Increases outputs and parameters from 5 to over 200
!	HTML Tutorial by Sam Savage on Understanding Uncertainty Through Simulation
!	Several New Distribution Functions Including
	!	Multivariate Normal
	!	Shuffling for Permutations
	!	Row-wise and Column-wise resampling
	!	Roger Myerson's Generalized Lognormal
!	FREEZE/THAW commands make simulation models portable
!	Animated Common Graphs

Click below to download a...

"Dr. Savage's Distribution Strings represent a major breakthrough in the communication of risk and uncertainty. It significantly widens the practical applicability of sound theory in these fields."
	-Harry Markowitz Nobel Laureate in Economics

"Sam Savage is the Edward Tufte of Risk."
	-Matthew Raphaelson Executive Vice President Wells Farge Bank

"Sam Savage is a rare expositor. He has a killer instinct for the heart of the matter and a fabulous talent for making it fascinating, easy, fun, and perhaps most important, profitable."
	-Peter L. Bernstein Author, "Against the Gods: The Remarkable Story of Risk"

Dr. Sam Savage

Dr. Sam Savage is an acclaimed author, educator and software developer in the field of Management Science. He is the founder and president of AnalyCorp Inc., a firm that develops executive education programs and software for improving business analysis. Savage is also a Consulting Professor of Management Science & Engineering at Stanford University. Before coming to Stanford, Savage taught at the University of Chicago's graduate School of Business for 15 years. Recently he has also been a Visiting Professor at Northwestern University's Kellogg School and the Naval Postgraduate School in Monterrey.

In 1986 Savage received PC Magazine's Technical Excellence Award for his pioneering work in bringing management science techniques to the spreadsheet environment. The 2nd edition of his book, Decision Making with Insight, with Insight.xla 2.0, Analysis Software for Microsoft Excel has recently been published by Duxbury press. In a foreword to this work, Harry Markowitz, Nobel Laureate in Economics, writes: "Rarely has such sound theory been provided in such an entertaining manner... INSIGHT is a must read." Savage has also published in both technical journals and the popular press.

He has extensive consulting experience in industries as diverse as petroleum, health care management and banking, and has served as an expert witness in litigation. Savage has developed and delivered numerous courses on management science issues for both public firms and the U.S. Department of Defense. Recently his efforts have been concentrated in the area of modeling and controlling economic risk...

From Combinatorial Optimization to Combinatorial Obfuscation and Back

Savage received his PhD in 1973 from Yale University in the area of combinatorial optimization (a fancy word for scheduling problems).

After spending a year at General Motors Research Laboratory outside of Detroit, Savage joined the Management Science faculty of the University of Chicago Graduate School of Business. Here he discovered that an Algebraic Curtain separated his management students from management science.

Discouraged, he abandoned management science in 1976, and spent a year dabbling in folk music while keeping his day job teaching calculus and computer science at Chicago. Savage composed a few tunes during this period in conjunction with his step-brother, John Pearce, and happily some tapes still survive from the analog age. (John went on to found MediaMap, a service provider to the PR industry; he and Sam are pictured at right.)

Two things ultimately dissuaded Savage from a career in music. First, there were a lot of people who were far better than he was. And second, they weren't making it in the music business either.

From Combinatorial Optimization to Combinatorial Obfuscation and Back, Part 2

Still not ready to return to combinatorial optimization, Savage did an about-face, and entered the field of combinatorial obfuscation (a fancy word for puzzles). Inspired by the tessellation patterns of Dutch artist, M.C. Escher, he developed the SHMUZZLE® Puzzle in 1979. This venture led in 1981 to Savage's first mature relationship with a computer. The machine, on which SHMUZZLES Inc. kept its accounts receivable, was a TRS Model II with 8 inch floppy disks. This CPM machine combined the features of a microcomputer with those of a Van de Graaff static electricity generator (not a great combination.)

In 1985, Savage teamed up with Professor Linus Schrage (also of the University of Chicago) to develop a software package called What'sBest!, that coupled Linear Programming to spreadsheets. This package won PC Magazine's Technical Excellence Award in 1986, and helped bring down the algebraic curtain. Through this work, Savage was reborn as a Management Scientist, and has worked ever since to bring analytical tools to managers in an algebra free environment. (What'sBest!® is available from Lindo Systems.)

In 1990, Savage moved to Stanford, where he currently teaches a popular course on Interactive Management Science using Excel. He is currently exploring the potential of various forms of on-line education.

The Flaw of Averages

A common cause of bad planning is an error Dr. Savage calls the Flaw of Averages which may be stated as follows: plans based on average assumptions are wrong on average.

As a sobering example, consider the state of a drunk, wandering around on a busy highway. His average position is the centerline, so...

Illustration from "INSIGHT.xla: Business Analysis Software for Microsoft Excel," 1st edition, by S. L. Savage, copyright 1998. Reproduced with permission of Brooks/Cole, an imprint of the Wadsworth Group, a division of Thomson Learning.

Success Stories

Dr. Savage has assisted a range of industry and government organizations with their decisions related to risk and uncertainty. His unique approach, which he calls Disciplined Intuition, combines theoretical and experiential training to improve on-the-spot decision making. Unlike typical consultants who help clients to "catch a fish," Savage teaches enterprises to "catch their own fish." This has impacted the daily practices of these organizations, resulting in a material improvement in the way they now do business.

Wells Fargo's California Regional Banking group has fundamentally changed the way it structures, markets and prices its retail products," says Senior Vice President, Matthew Raphaelson. "Business schools teach the theory and the math, but Sam's approach is intuitive and visual."

Cineval LLC is a media-consulting firm in Los Angeles that advises film studios and their lenders on the value of their existing and future film libraries. "Sam helped us develop a simulation model using historical data that demonstrates the power of diversification in the movie business" says Cineval President, Rick Medress. The resulting Blitzogram™ interactive histogram is shown at right.

More Success Stories

The Leasing Exchange, a consortium of some of the largest lessors in the country, selected Dr. Savage to develop a course on Risk Modeling in Equipment Leasing. "Sam's perspective has given us new tools for looking at our world," says Townsend Walker, a director of the consortium who organized Savage's course. "Most of us had studied statistics and finance in school without putting it to practical use. Sam left us with a gut level understanding of the meaning of uncertainty and risk, and provided us with practical ways to measure and control them".

Kaufman Hall is a financial advisory firm serving the health care industry. Their ENUFF Advisor® financial planning software is in use by more than 600 organizations throughout the country. "With Sam's training and a bit of his help, we were able to incorporate Monte Carlo simulations into our software and & processes." says founding Partner Mark Hall, "This has helped us evaluate Merger & acquisition opportunities, Alternative debt financing strategies, Short-term cash flow risk Managed care contracts, and Staffing strategies."

Dr. Savage has also applied his expertise to modeling risky assets involving everything from petroleum exploration sites to entertainment investments. He has delivered numerous courses for the US Department of Defense, and has served as an expert in legal cases. "As a trial lawyer," says Greg Gallopoulos of Jenner & Block, a nationally pre-eminent litigation firm headquartered in Chicago, "I need technical experts who can take abstruse material and make it not just comprehensible, but entertaining, for the average person. That's what Sam does for statistical analysis."

Praise & Press
"Rarely has such sound theory been provided in such an entertaining manner. INSIGHT is a must read."
	Harry Markowitz Nobel Laureate in Economics
"Sam Savage is a rare expositor. He has a killer instinct for the heart of the matter and a fabulous talent for making it fascinating, easy, fun, and perhaps most important, profitable."
	Peter L. Berstein author of "Against the Gods - The Remarkable Story of Risk"
"Sam Savage has given us an enormously practical way to use business analysis tools such as simulation, decision trees, and optimization. These tools are taught in many business schools but the approach is, alas, too often skewed toward the theoretical and many students feel uneasy making the transition to use them in actual business situations."
	John P. Gould Professor & Former Dean University of Chicago Graduate School of Business
"I need technical experts who can take abstruse material and make it not just comprehensible, but entertaining, for the average person. That's what Dr. Savage does for statistical analysis."
	Greg Gallopoulos Jenner & Block

I. A Brief History of Civilization
A. Humans learn to read and write
B. Humans invent machines
C. Machines learn to read and write
II. The Industrial Revolution
	Period B of civilization climaxed in the Industrial Revolution, which involved harnessing the power of physics. To grasp the power of physics with our hands often requires an industrial designer to develop an appropriate handle. Some important handles include the steering wheel, the light switch and the typewriter keyboard.
III. The Information Revolution
	We are now at the dawn of period C of civilization, the Information Revolution. The power we are harnessing this time is not physical, but abstract and mathematical. The field of Informational Design is evolving to help us to grasp this power not with our hands but with our minds. Thus the goal of the informational designer is to develop a mindle. Some important recent mindles are:
	»	Spreadsheet models, which allow us to grasp the results of different investment strategies
	»	Radar screens, which allow air traffic controllers to grasp the locations of aircraft
	»	Medical Imaging, which allows doctors to grasp what's going on inside our bodies
IV. Period D, the Distant Future
	My guess is that the boundary between biological and mechanical will blur, and our mindles will be wired directly into our nervous systems.

Beat The Odds: Understand Uncertainty Optimize Magazine, December 2001
	Covers the basics of Monte Carlo simulation for modeling simple business problem. Includes diversification of investments, and optimal funding of a capital intensive project. Includes animations and a downloadable tutorial. See Optimize Magazine.
A Better Way to Size Up Your Nest Egg: "Monte Carlo" models simulate all kinds of scenarios
	Business Week article by Chris Farrell, January 22, 2001, in which Dr. Savage is quoted. Discusses the trend of using simulation to model retirement portfolios.
The Flaw of Averages San Jose Mercury News, October 8, 2000
	Discusses the fallacy of assuming average returns on a retirement portfolio. Simple annuity models are available for download. Click here to read the article.
Understanding Uncertainty Through Simulation AnalyCorp Inc.
	Dr. Savage's html-based tutorial on the basics of Monte Carlo Simulation in Excel. Click here for the tutorial.
For Additional Publications Visit Dr. Savage's Web Page at Stanford University.

Disciplined Intuition:

Connecting the Seat of the Intellect to the Seat of the Pants

Formal education consists of reading, memorization and other cerebral activities. Yet many things as basic as riding a bicycle, can't be explained at all intellectually and must be experienced through the seat of the pants until they become intuitive. Most serious education requires both a theoretical and experiential perspective.

Savage learned this in spades during flight training in a sailplane, where to survive he had to establish a dialog between the seat of his intellect and the seat of his pants. Unlike learning to ride a bike through trial and error, however, intuition into flight must be based on a disciplined regimen of theory and practice. Savage calls this Disciplined Intuition and it serves as his philosophy for analytical modeling.

Today, with the aid of interactive spreadsheets, he provides a hands-on understanding of Management Science techniques, that only a few years ago were separated from Management by an Algebraic Curtain of arcane formulas.

Dr. Sam Savage introduces a NEW Seminar Series
in New York, San Francisco, Chicago, and London!

A One day seminar that will change the way you
manage risk and return

Visualizing Uncertainty and Risk

21st Century Portfolio Theory

Wiring your Organization for Risk

A Seminar presenting Dr. Savage's radical new approach to consolidating risks across an industry,enterprise or stock portfolio. It is based on the DIST™ Distribution String, developed in collaboration with SAS Institute, Oracle Corp., and Frontline Systems. Dr. Savage is assisting Royal Dutch Shell, and Merck & Co in applying it to investments in R&D projects. In addition, Morningstar has begun to explore its use in financial portfolios.

You will leave this course with both a working knowledge of these methodologies and the software to begin applying them on your own.

The Basics of Simulating Uncertainty
By generating tens of thousands of random numbers, computers can simulate uncertain future scenarios. The graphical output of these programs provides an intuitive feel for uncertainty not usually provided by the statistics you were taught in school.

Diversification and Risk Reduction
We have all heard that you shouldn't put all your eggs in one basket, but how many baskets should you use? You will learn how to create interactive graphs like the one at right based on historical data (in this case Hollywood film revenues) and evaluate the effects of diversification among investments.

The Flaw of Averages
You may have heard the story about the statistician who drowned while crossing a river that was on average 3 feet deep. This is a classic example of what Dr. Savage calls the Flaw of Averages. Unfortunately the statistician's fate is analogous to what may happen when "average" values of uncertain numbers are plugged into financial plans. Simulating the financial plan not only maps out the river-bottom before you wade in, but also suggests the safest place to cross.

Statistical Dependence
Words like correlation and covariance do not adequately describe this important subject at the heart of investment theory, and furthermore they confuse people. Models based on raw data, on the other hand are often easier to understand and more adaptable than traditional methods. Classical statistical tests are being replaced by Berkson's Inter Ocular Trauma test which measures whether or not the evidence hits you between the eyes.

"I found this complex subject matter as presented to be easily absorbed, eminently practical and immediately useful." Keith J. Birdwell Budget Director Harborview Medical Center		"The seminar was stimulating, eye-opening, and of immediate value. Clear, practical examples provided effective guidance on how to tackle real-world problems." Paul Lundegard Asset Management Group Unocal Corporation
"Business schools teach the theory and the math, but Sam's approach is intuitive and visual. His tools work right in the spreadsheet, so most people can hit the ground running and bosses will have no trouble reading and interpreting the results." Matthew Raphaelson Senior VP, Wells Fargo & Co.		"This course pole vaults the student over a cross-bar of theory into a new understanding of the real financial world." John W. Beach DSD Labs
"Sam Savage is a rare expositor. He has a killer instinct for the heart of the matter and a fabulous talent for making it fascinating, easy, fun, and perhaps most important, profitable." Peter L. Bernstein Author, "Against the Gods: The Remarkable Story of Risk"		"Sam's course was fun, but more important, valuable. In just a few hours I gained important and sometimes unintuitive insights into business planning that I could use in assessing and managing my firm's risks." Dr. Joel L. Prakken Chairman Macroeconomic Advisers, LLC

Seminars start at 9 a.m. and conclude at 5 p.m. with a lunch break from 12 to 1. Morning and afternoon coffee breaks are provided but lunch is not included. For more information, call the AnalyCorp Seminar Office at (800) 400-2120.

Continuing Professional Education Credit
These seminars are accredited by the Illinois Department of Professional Regulation to provide 7 hours of CPE credit per day. They are also eligible for a maximum of 7 hours per day of Chartered Financial Analyst (CFA®) Continuing Education credits for members of the Association for Investment Management and Research. The seminars are structured to provide 7 hours of productive learning time per day. Members should consult AIMR's Continuing Education policy to determine the appropriate number of credits.

FEES
First Participant $995
Each additional participant from the same organization $895
(Corporate rates and in-house seminars also available)

Cancellations
Cancellations received more than three business days before the seminar date are subject to a $75 service charge. Cancellations within three business days of the seminar date are subject to the full fee. AnalyCorp Inc. reserves the right to cancel the seminar, in which case registrants will receive a full refund of the tuition fee.

"A savage onslaught against the algebraic curtain..."
	Bill Machrone PC Week