In finance, there’s this theory called mean reversion. This theory, oft-quoted by economists and investors around the world, suggests that prices and returns eventually find their way back to average after a period of excessive highs or lows.
In other words, they revert to the mean.
The concept of mean reversion has been observed time and time again. Take, for example, stock market crashes. While the recovery period may vary from one event to the next, these markets, eventually and over the long-term, have found their way back to average.
But what if we took this theory outside of finance?