# The Signal and the Noise ## Metadata * Author: [Nate Silver](https://www.amazon.comundefined) * ASIN: B007V65R54 * Reference: https://www.amazon.com/dp/B007V65R54 * [Kindle link](kindle://book?action=open&asin=B007V65R54) ## Highlights like in the so-called Wicked Bible, — location: [207](kindle://book?action=open&asin=B007V65R54&location=207) ^ref-3454 --- Kroll faults the ratings agencies most of all for their lack of “surveillance.” It is an ironic term coming from Kroll, who before getting into the ratings game had become modestly famous (and somewhat immodestly rich) from his original company, Kroll Inc., which acted as a sort of detective agency to patrol corporate fraud. — location: [515](kindle://book?action=open&asin=B007V65R54&location=515) ^ref-27609 --- Human beings have an extraordinary capacity to ignore risks that threaten their livelihood, as though this will make them go away. — location: [557](kindle://book?action=open&asin=B007V65R54&location=557) ^ref-24185 --- Anil Kashyap, who teaches a course on the financial crisis to students at the University of Chicago, has come up with a simplified example of a CDO, and I’ll use a version of this example here. — location: [576](kindle://book?action=open&asin=B007V65R54&location=576) ^ref-61299 --- Risk, as first articulated by the economist Frank H. Knight in 1921,45 is something that you can put a price on. Say — location: [620](kindle://book?action=open&asin=B007V65R54&location=620) ^ref-47261 --- Uncertainty, on the other hand, is risk that is hard to measure. You might have some vague awareness of the demons lurking out there. You might even be acutely concerned about them. But you have no real idea how many of them there are or when they might strike. Your back-of-the-envelope estimate might be off by a factor of 100 or by a factor of 1,000; there is no good way to know. This is uncertainty. Risk greases the wheels of a free-market economy; uncertainty grinds them to a halt. — location: [625](kindle://book?action=open&asin=B007V65R54&location=625) ^ref-56598 --- In fact, according to an index developed by Robert Shiller and his colleague Karl Case, the market price of an American home has barely increased at all over the long run. After — location: [636](kindle://book?action=open&asin=B007V65R54&location=636) ^ref-57857 --- Akerlof wrote a famous paper on this subject called “The Market for Lemons”78—it won him a Nobel Prize. In the paper, he demonstrated that in a market plagued by asymmetries of information, the quality of goods will decrease and the market will come to be dominated by crooked sellers and gullible or desperate buyers. — location: [727](kindle://book?action=open&asin=B007V65R54&location=727) ^ref-64398 --- its own book (and has been described in some excellent ones, like Too Big to Fail). — location: [749](kindle://book?action=open&asin=B007V65R54&location=749) ^ref-58705 --- “The fox knows many little things, but the hedgehog knows one big thing.” — location: [1018](kindle://book?action=open&asin=B007V65R54&location=1018) ^ref-55564 --- was wrong, there is no glory in sticking to it. “When the facts change, I change my mind,” the economist John Maynard Keynes — location: [1225](kindle://book?action=open&asin=B007V65R54&location=1225) ^ref-45579 --- Cook Political Report. — location: [1281](kindle://book?action=open&asin=B007V65R54&location=1281) ^ref-51583 --- the flap of a butterfly’s wings in Brazil can set off a tornado in Texas. It comes from the title of a paper19 delivered in 1972 by MIT’s Edward Lorenz, who — location: [2094](kindle://book?action=open&asin=B007V65R54&location=2094) ^ref-36960 --- Distort a series of letters just slightly—as with the CAPTCHA technology that is often used in spam or password protection—and very “smart” computers get very confused. They are too literal-minded, unable to recognize the pattern once its subjected — location: [2186](kindle://book?action=open&asin=B007V65R54&location=2186) ^ref-8930 --- The theory of complexity that the late physicist Per Bak and — location: [2908](kindle://book?action=open&asin=B007V65R54&location=2908) ^ref-57717 --- Hatzius penned a provocative memo entitled “Leveraged Losses: Why Mortgage Defaults Matter.” It — location: [3070](kindle://book?action=open&asin=B007V65R54&location=3070) ^ref-62304 --- physical simulation of the atmosphere, meteorologists are able to do much better than purely statistical approaches to weather prediction. — location: [3768](kindle://book?action=open&asin=B007V65R54&location=3768) ^ref-44942 --- Voulgaris might expect that an over bet on Nuggets games will win 70 percent of the time as opposed to the customary 50 percent. As — location: [4308](kindle://book?action=open&asin=B007V65R54&location=4308) ^ref-18527 --- Elements of Poker, — location: [5335](kindle://book?action=open&asin=B007V65R54&location=5335) ^ref-42437 --- bubble-detection method is proposed by the Yale economist Robert J. Shiller, whose prescient work on the housing bubble I discussed in chapter 1. Shiller is best known for his book Irrational Exuberance. — location: [5691](kindle://book?action=open&asin=B007V65R54&location=5691) ^ref-63768 --- Scott Armstrong, a professor at the Wharton School at the University of Pennsylvania, is such a skeptic. He is also among the small group of people who have devoted their lives to studying forecasting. His book, Principles of Forecasting, should be considered canonical to anybody who is seriously interested — location: [6216](kindle://book?action=open&asin=B007V65R54&location=6216) ^ref-38884 --- at RealClimate.org, — location: [6669](kindle://book?action=open&asin=B007V65R54&location=6669) ^ref-21281 --- a terror attack killing at least one hundred people about six times over the thirty-one-year period from 1979 through 2009. (This is close to the actual figure: there were actually seven such attacks during this period.) Likewise, it implies that an attack that killed 1,000 people would occur about once every twenty-two years. And it suggests that something on the scale of September 11,48 which killed almost 3,000 people, would occur about once every forty years. — location: [7000](kindle://book?action=open&asin=B007V65R54&location=7000) ^ref-22416 --- What Israel certainly does not tolerate is the potential for large-scale terrorism (as might be made more likely, for instance, by one of their neighbors acquiring weapons of mass destruction). There is some evidence that their approach is successful: Israel is the one country that has been able to bend Clauset’s curve. — location: [7188](kindle://book?action=open&asin=B007V65R54&location=7188) ^ref-62700 --- Terrance Odean, “Do Investors Trade Too Much?” American Economic Review, 89, no. 5 (December 1999), pp. 1279–1298. http://web.ku.edu/~finpko/myssi/FIN938/Odean_Do%20Investors%20Trade%20Too%20Much_AER_1999.pdf. — location: [8940](kindle://book?action=open&asin=B007V65R54&location=8940) ^ref-48173 --- David Rothschild, “Forecasting Elections: Comparing Prediction Markets, Polls, and Their Biases,” Public Opinion Quarterly, 73, no. 5 (2009), pp. 895–916. http://assets.wharton.upenn.edu/~rothscdm/RothschildPOQ2009.pdf. — location: [8957](kindle://book?action=open&asin=B007V65R54&location=8957) ^ref-32078 --- Alan J. Ziobrowski, Ping Cheng, James W. Boyd, and Brigitte J. Ziobrowski, “Abnormal Returns from the Common Stock Investments of the U.S. Senate,” Journal of Financial and Quantiative Analysis, 39, no. 4 (December 2004). http://www.walkerd.people.cofc.edu/400/Sobel/P-04.%20Ziobrowski%20-%20Abnormal%20Returns%20US%20Senate.pdf. — location: [9008](kindle://book?action=open&asin=B007V65R54&location=9008) ^ref-54429 --- Odean, “Do Investors Trade Too Much?” — location: [9149](kindle://book?action=open&asin=B007V65R54&location=9149) ^ref-53998 --- Kerry Emanuel, What We Know About Climate Change (Boston: MIT Press, 2007). http://www.amazon.com/About-Climate-Change-Boston-Review/dp/0262050897. — location: [9277](kindle://book?action=open&asin=B007V65R54&location=9277) ^ref-59915 --- Winter Mason and Aaron Clauset, “Friends FTW! Friendship and Competition in Halo: Reach,” Arxiv, March 3, 2012. http://scholar.google.com/citations?view_op=view_citation&hl=en&user=e7VI_HcAAAAJ&sortby=pubdate&citation_for_view=e7VI_HcAAAAJ:e5wmG9Sq2KIC. — location: [9521](kindle://book?action=open&asin=B007V65R54&location=9521) ^ref-29284 --- 69. “Dark Winter Exercise Overview;” Center for Biosecurity, University of Pittsburg Medical Center, June 22–23, 2001. http://www.upmc-biosecurity.org/website/events/2001_darkwinter/index.html. 70. — location: [9581](kindle://book?action=open&asin=B007V65R54&location=9581) ^ref-24936 --- anywhere from 3 percent to 10 percent instead of 7 percent. The answer to what economists call the “equity premium puzzle”—why stocks have returned so much more money than bonds in a way that is disproportionate to the risks they entail—may simply be that the returns stocks achieved in the twentieth century were anomalous, and the true long-run return is not as high as 7 percent. — location: [11081](kindle://book?action=open&asin=B007V65R54&location=11081) ^ref-36234 ---