The Signal and the Noise: Why So Many Predictions Fail-but Some Don't

But if a home was not a profitable investment it had at least been a safe one.

statheads can have their biases too. One of the most pernicious ones is to assume that if something cannot easily be quantified, it does not matter.

The core analytic skill, rather, is what players call “hand reading”: in figuring which cards your opponent might hold, and how they might affect her decisions throughout the rest of the hand. This is an extremely challenging problem, especially in Texas hold ’em, the most commonly played variant of the game.

Some investors have little appetite for risk and some have plenty, but their preferences balance out: if the price of a stock goes down because a company’s financial position deteriorates, the fearful investor sells his shares to a greedy one who is hoping to bottom-feed. Greed and fear are volatile quantities, however, and the balance can get out

If the fall of the Soviet empire seemed predictable after the fact, however, almost no mainstream political scientist had seen it coming. The few exceptions were often the subject of ridicule.8 If political scientists couldn’t predict the downfall of the Soviet Union—perhaps the most important event in the latter half of the twentieth century—then

Although the statistical methods that epidemiologists use when a flu outbreak is first detected are not quite as simple as the preceding examples, they still face the challenge of making extrapolations from a small number of potentially dubious data points.

Scientists require a high burden of proof before they are willing to conclude that a hypothesis is incontrovertible. The greenhouse hypothesis has met this standard, which is why the original IPCC report singled it out from among hundreds of findings as the only thing that scientists were absolutely certain about. The science behind the greenhouse

This property—group forecasts beat individual ones—has been found to be true in almost every field in which it has been studied. And yet while the notion that aggregate forecasts beat individual ones is an important empirical regularity, it is sometimes used as a cop-out when forecasts might be improved.

In the United States, we live in a very results-oriented society. If someone is rich or famous or beautiful, we tend to think they deserve to be those things. Often, in fact, these factors are self-reinforcing: making money begets more opportunities to make money; being famous provides someone with more ways to leverage their celebrity; standards o