Richardson, Lewis Fry, 115–16, 129, 472
Richter, Charles, 142n, 146, 151, 168
Richter scale, 142n
risk, 502
CDOs and, 29–30
definition of, 29
forecasting economy and, 203
uncertainty vs., 26, 29, 36
risk aversion, 27
Rita, Hurricane, 139
river, in poker, 306, 307, 494
Rivera, Mariano, 101
Rivera, Ruben, 92
“Road to Wisdom, The” (Hein), 232n
rock-paper-scissors, 345n, 364
Rogers, Mark, 89
Rogoff, Kenneth, 39–40, 43
Romania, 52
Romer, Christina, 40, 41
Romney, Mitt, 333, 474
Rood, Richard, 379–80, 383, 410
Roosevelt, Franklin Delano, 412
root-mean squared error (RMSE), 497
Rose, Bruce, 128, 129, 133, 135
Rothschild, David, 334, 336
roulette, 324
Rounders, 317
Royal McBee LGP-30, 119
Royal Society, 241
rubella, 224
Rumsfeld, Donald, 415–16, 419, 420, 424, 428, 436–37, 441, 510
Rundle, John, 174–75
Russia, 379, 416, 434
Ryan, Brendan, 321
Rybka, 493–94
Sabermetrics, 77
sabotage, 416, 418, 423
Sachs, Jeffrey, 189
sacrifices, in chess, 273–74
St. Louis Cardinals, 87
Salk, Jonas, 206
sample sizes, 44, 338–39
San Andreas Fault, 158–59
Sandberg, Ryne, 102
Sanders, John, 94–98, 101, 103, 105
S&P 500, 24–25, 197, 324, 339, 347, 365–66, 462, 499–500, 503
CFOs as overestimating ability to forecast, 359
5–year average return on, 351
1–year return on, 350
P/E ratio of, 349, 350, 351
10–year average return on, 351
20–year return on, 350
San Francisco, Calif., 149, 160, 219n, 221–23, 222, 225, 476
San Simeon, Calif., 160
Santorum, Rick, 217, 333
SARS, 229
satellite temperature record, 394
Saturn, 242–43
savings glut, 31
scenario uncertainty, 392–93
Schelling, Thomas, 419, 420, 510
Schlumberger, William, 262
Schmalkaldic War, 4
Schmidt, Gavin, 390–91, 392, 399, 405, 409
Schneier, Bruce, 439, 443
Schoolhouse Blizzard, 122–23
Schwarzenegger, Arnold, 160, 290
science, 10
as deliberative process, 284
Industrial Revolution and, 6
progress of, 1, 4, 7, 112, 243, 406, 410–11, 447
Science, 395
scientific determinism, 112, 113, 241, 242, 249, 448
scientific method, 9, 230, 256–57, 257
Scottish Civil War, 4
scouts, 76, 77
biases of, 91–93, 102
budget for, 99
PECOTA vs., 88–90, 90, 91, 102, 105, 106–7
statheads vs., 86, 88, 128
search trees, 284, 285
sea-rise levels, 385
Seattle, Wash., 150
Securities and Exchange Commission, 24, 353
security theater, 439
self-awareness, 328
self-canceling predictions, 219–20, 228
self-confidence, 97
see also overconfidence
self-fulfilling predictions, 216–19, 353
semiconductor companies, 186
semistrong efficient-market hypothesis, 341
Senate, U.S., 62–63, 63, 69
Energy Committee of, 370
see also Congress, U.S.; House of Representatives, U.S.
September 11, 2001, terrorist attacks, 247–48, 247, 248, 412, 417, 419, 421, 425–28, 429, 431–32, 436, 438, 444, 449, 510–11
as ambitious, 422–23
as unpredicted, 10–11
service sector, 189
Shakespeare, William, 4–5, 418, 460
Shannon, Claude, 265–66
Sharma, Deven, 22, 25
Shaw, Brian, 237
Shiller, Robert, 22, 30, 31, 32, 347–48, 349, 353, 354, 369, 500
shopping malls, 228, 440
short-selling, 355, 360, 361, 501
shortstops, 446, 447
signals, 175, 186
in climatology, 371–73
competing, 416–18, 417
noise vs., 8, 13, 17, 60, 81, 133, 145, 154, 162, 163, 173, 185, 196, 285–86, 295, 327, 340, 371–73, 388–89, 390–91, 404, 448, 451, 453
in predictive models, 388–89
in stock market, 368
of terrorism, 438, 442–45
similarity scores, 84–85
sine wave, 416–17
Singapore, 210
SIR model, 220–21, 221, 223, 225, 389
skill, 79, 312
luck vs., 321–23, 322, 338–39
Skynet, 290
Slate, 353
slowplaying, 304
smallpox, 214, 229, 436, 485
Smith, Adam, 332
Smith, Ozzie, 446
snow, 391, 399, 473
Snowpocalypse, 474
Soaring Eagle Indian Casino, 296–97
Solar Cycle 24, 392, 393
Solow, Robert, 7
Sornette, Didier, 368, 369
Soros, George, 356, 370
South Korea, 372
Soviet Union, 467
disintegration of, 50–51, 66
economy of, 51–52
Spain, 210
Spanish flu, 205, 211, 214, 224, 229
Spanish Inquisition, 4
sports, 63
see also baseball, basketball
Stairs, Matt, 92
Standard & Poor’s (S&P), 1, 19, 20–21, 22, 24, 25–26, 41, 43, 45, 463
see also S&P 500
standard deviation, 322
staph infections, 227
statheads, 87–88
biases of, 91–93
scouts vs., 86, 88, 128
statistical significance test, 251, 253, 256, 372n
statistics, context and, 79, 84, 91, 100–102, 105, 234, 240
Stenson, Dernell, 85
Stephen, Zackary “ZakS,” 292–93
stereotypes, 298–99
Stiglitz, Joseph, 363
stimulus package, 14, 40, 184, 194, 379, 398, 466–67
stock market, 19, 185–86, 253, 256, 329–70
Bayesian reasoning and, 259–60
competition in, 313, 352, 364
correlations in price movements in, 358
crashes in, 354–56, 354
dynamic group behavior in, 335
fast track in, 368
forecasting service for, 337–38
future returns of, 330–31, 332–33
lack of predictability in, 337–38, 342, 343–46, 359, 364–66
long run vs. short run in, 404
as 90 percent rational, 367
noise in, 362–64
overconfidence in, 359–60, 367
P/E (price-to-earnings) ratio of, 348, 349, 350, 354, 365, 369
public sentiment on, 364–65, 365
signal track in, 368
technical analysis of, 339–40, 341
velocity and volume of trading on, 329–30, 330, 336
see also efficient-market hypothesis
stocks, see stock market
StormPulse.com, 471–72
strategy, tactics vs., 273–76, 278, 284
stress, effect on decision making, 97–98, 449
strikeouts, 79–80, 91
strike zone, 102
strong efficient-market hypothesis, 341–42
structural uncertain
ty, 393
structure-finance ratings, 24
subduction zone, 143–44
subjectivity, 14, 64, 72–73, 100, 252, 253, 255, 258-59, 288, 313, 403, 453
subprime mortgages, 27, 33, 464
suburbs, 31
suckers, in gambling, 56, 237, 240, 317–18, 320
suicide attacks, 423–24, 424
see also September 11, 2001, terrorist attacks
suited connectors, 301, 306
sulfur, 392, 399–400, 400, 401
Sulmona, Italy, 143, 145
Sumatra, Indonesia, 161, 171, 172
Summers, Larry, 37–38, 39, 40, 41, 466
sunspots, 392, 401
Super Bowl, 185, 371
superstition, 5
Super Tuesday, 336
surveillance, in credit ratings, 23–24
Survey of Professional Forecasters, 33, 179–83, 191, 197–98, 199, 200–201, 466–67, 480, 481, 482
Suzuki, Ichiro, 101
swine flu, 208, 209–12, 218–19, 224–25, 228–29
Sydney, Australia, 222
syphilis, 222, 222, 225
tactics, strategy vs., 273–76, 278, 284
Taleb, Nassim Nicholas, 368n
tape, in credit ratings, 24
taxes, 481
Taylor, Brien, 92
technical analysis, 339–40
technological progress, 112, 243, 292–93, 410–11
technology, 1, 313
tectonic plates, 16, 144, 148, 173
Tehran, 147, 151–53
Tejada, Miguel, 99
telescope, 243
television pundits, 11, 47–50, 49, 73, 314, 448
hedgehogs as, 55
temperature records, 393–95, 394, 397–98, 403–4, 404, 405, 506
Tenet, George, 422, 424–25, 510
tennis, 496
Terminator series, 290n
terrorism, 511–12
definition of, 428
depth vs. breadth problem in prevention of, 273
frequency vs. death toll of, 429–30, 430, 431, 432–33, 437, 439, 441, 442, 442
in Israel, 440–42
mathematics of, 425–32
see also September 11, 2001, terrorist attacks
Tetlock, Philip E., 11, 51, 52–53, 56–57, 64, 67, 100, 157, 183, 443, 450, 452, 467
Texas, 464
Texas hold ’em, 298–302, 464
limit, 311, 322, 322, 324n
no-limit, 300–308, 309–11, 315–16, 316, 318, 324n, 495
Texas Rangers, 89
Thailand, 209
Thaler, Richard, 361–62
theory, necessity of, 9, 197, 372-73
Thirty Years’ War, 4
This Time Is Different: Eight Centuries of Financial Folly (Reinhart and Rogoff), 39–40, 43
Thomas Aquinas, Saint, 112
Thomas J. Watson Center, 283–84
3Com, 362
tilt, in poker, 309, 310, 324–26
Times (London), 212
Times Square, 433, 438
toads, 148, 253, 255, 476
Toffler, Alvin, 12, 13
, Japan, 155, 156, 169, 170–71, 172
Tolstoy, Leo, 53
Too Big to Fail (Sorkin), 37
Tornado Alley, 138
tornadoes, 145, 195
Toronto Blue Jays, 76, 87
Torres y Quevedo, Leonardo, 265
Tragedy of Julius Caesar, The (Shakespeare), 4–5, 9, 418, 460
transaction costs, 342–43, 344–45, 345
Treasury bonds, U.S., 20
trial and error, 289, 290–92
Tropical Depression Twelve, 108
Truman, Harry, 56
Trump, Donald, 55
Tulowitzki, Troy, 89
turn, in poker, 299, 306
Tuvalu, 378
Tversky, Amos, 64
24, 435
24/7 Media, 353
Two Plus Two, 308
2001: A Space Odyssey, 264
Tyndall, John, 375
Ulan Bator, Mongolia, 374
uncertainty, 15, 64, 444, 448, 450
of CDOs, 29–30
in chess, 264
in climate forecasts, 382, 389–93, 390, 406–8
communication of, 177–79
definition of, 29
as enemy of forecasting, 177
in frequentism, 253
metaphysical vs. epistemological, 249
in poker, 297
quantification of, 73
risk vs., 26, 29, 36
scenario, 392–93
structural, 393
uncertainty principle, 113–14, 118, 188, 472
underfitting, 163
unemployment, 14, 19, 39–41, 176–77, 184, 187, 198, 200, 202, 482
unfamiliar, improbable vs., 419–20
United Kingdom, 210, 394, 416
United Nations, 213, 410
United States:
characteristics of, 10
flu in, 210, 211, 215–16
founding of, 2
houses as poor investments in, 30
late-twentieth century recessions in, 7
as results-oriented society, 326–27
United States Geological Survey (USGS), 146, 148–49, 152–53, 158, 159, 160, 476
unknown unknowns, 11, 26, 420–21, 424, 443, 444, 511
Unlawful Internet Gambling Enforcement Act (UIGEA), 319–20
updating predictions, see Bayesian reasoning
Urbahn, Keith, 415, 424, 509
usefulness, calculation of in forecasting, 290–91
Utah Jazz, 238
values voters, 319
Van Poppel, Todd, 92
Varian, Hal, 200, 290
variance, 326
Venus, 374
Veracruz, Mexico, 210, 216
Vidro, Jose, 85
Vietnam, 209
vigorish, 256
vision, 123, 124
Vladimir, 78, 83
volcanoes, 146, 392, 393
von Neumann, John, 116, 167
Voulgaris, Haralabos “Bob,” 232–40, 238, 246, 256–58, 489
walks, in baseball, 79–80, 471
Wall Street Journal, 33, 377, 466–67
War of 1812, 419
War of the Holy League, 4
wars, cause of, 259
Washington, D.C., 395–96, 432
Wasserman, David, 70, 71–72
water vapor, 374, 375–76
Watts Up With That, 409
weak efficient-market hypothesis, 341
wealth effect, 34
weapons of mass destruction, 420, 432, 442, 443
see also nuclear weapons
Weather Channel, 128–30, 131, 132, 133, 135–36, 136
Weather.com, 128
weather forecasting, 10, 16, 21–22, 108–12, 115, 126, 162, 473
algorithms for, 128–29
by climatology, 131, 153
competition in, 127–28, 131–37, 132
by computer, 116–18, 123–25, 289
death by lightning and, 125–26
eight to ten days in advance, 132
eyesight in, 123, 124
failures of, 21–22, 114–18
feedback on, 134–35, 387
for-profit, 128–29, 131–32, 133–34, 135–36
human element in, 123–25
of hurricanes, 126–27, 127
matrices in, 114–18
models for, 114–18, 119, 120, 121, 122, 123–25, 225, 226
probability and, 195
recent improvements in, 125–26, 225, 386
as sensitive to initial conditions, 119, 121
as theoretically solvable, 267
three definitions of quality of, 129–30
uncertain initial conditions in, 195
Weather.gov, 128
Weather Service, 473
Weber, Max, 5
Weekly Leading Index, 196
wet bias, 134–38, 474
WFG, 88
wheat, 466
White House economic projection, 40–42, 41
“Why Most Published Research Findings Are False” (Ioannidis), 11, 249
Wicked Bible, 3, 13
Wilson, James Q., 439
wine, 466
win-loss record, 77, 79–80, 103, 106
winner’s curse, 359–60
wins above replacement player (WARP), 90
Winter Meetings, 86
Wired, 9
Wirth, Tim, 370n
wisdom-of-crowds principle, 335, 358
see also consensus
Wohlstetter, Roberta, 415, 416, 418, 419
Wolfers, Justin, 333–34, 335–36, 497
Wood, Brandon, 89
work ethic, 5, 97
World Health Organization (WHO), 206, 211
World Series of Poker, 294–95, 296
World Trade Center, 422
see also September 11, 2001, terrorist attacks
World War I, 205, 453
World War II, 31, 412–13, 414, 432, 464, 470
World Weather Building, 122–25, 473
World Wide Web, 448, 514
Wunderground.com, 131
Yahoo!, 353
Yemen, 422, 423
Youkilis, Kevin, 76
Zito, Barry, 99
Zuckerman, Mort, 467
* This property is true of National Weather Service forecasts—but not of your local TV meteorologist. Their incentive may be to exaggerate the probability of rain for the sake of better ratings. More about this in chapter 4.
* Tape is also a term of art in the ratings industry, referring to new and fresh data on individual mortgages.
* In 2005, the average Moody’s employee made $185,000, compared with the $520,000 received by the average Goldman Sachs employee that same year.
* These types of risks might fall into the category “unknown knowns.”
* And probably also a stupid bet if you’ve ever seen the Redskins play.
* Most major cable providers keep Fox News and MSNBC at least a couple of channels apart in their lineups.
* Of the series of revolutions in the Eastern bloc in 1989, only the one in Romania entailed substantial bloodshed.
* FiveThirtyEight’s name refers to the number of votes in the Electoral College (538).
* The classic form of media bias is “rooting for the story”—hoping for a more dramatic outcome that might increase newspaper sales.
* Not surprisingly, no Democrats told me this after the 2010 campaign—when our models consistently showed them losing badly.
* The Red Sox’s truly epic collapse—when they lost sixteen of their last twenty-one games and missed the playoffs after seeming almost certain to qualify for them—would come two years later in 2011.
* I traded Pedroia away in one of my fantasy leagues.
* James coined the term sabermetrics to describe the systematic study of baseball, especially through statistics. The term is derived from the acronym SABR, for Society of American Baseball Research, which was instrumental in the popularization of James’s work.