On: How Do Venture Capitalists Make Decisions?

[lappa]

If you have 5 firms with ROIs of -10%, -5%, -3%, 1%, 14% and 31%, then 50% of the firms have negative growth rates and the median firm loses money.

However you can observe that if you invested $100 ($600 total) into each firm, you would end up with $636.

Median return isn't a very useful measure of the health of a sector. It is a predictor for risk, but not a very good one.

[Retric → lappa]

Except the worst returns are closer to -100%, the median is closer to -30% and only a small fraction are positive.

Also, your example was 7 firms with the median being 1% and a positive return.

[lappa → Retric]

The explanation completely went over your head. The numbers weren't from measurements of actual firm performance, they were demonstrative examples to explain why measuring the median isn't very useful in this case.

And no, my example was 6 firms with the median having -1% growth rate, for the record.