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The national weather service once failed to include a confidence interval for an estimate, resulting in 75% of a city’s homes being destroyed. This is one of the many real-world examples Nate Silver gives of statistical mistakes and their consequences.

“Economists predicted only 2 of the 60 recessions around the world ahead of time.�� (p. 183)

From the foreclosure crisis to climate change, to sports betting, to terrorism, to poker (e.g., a skilled player playing full time for a year might make $275K or lose $35K), to chess—Kasparov once mistook a computer bug for deep tactical calculations and basically went on tilt for the rest of the chess match. The book’s coverage of such mistakes is fantastic. Here and there, it also provides some very useful advice.

“After all, any investor can do as well as the average investor with almost no effort. All he needs to do is buy an index fund that tracks the average of the S&P 500. In so doing he will come extremely close to replicating the average portfolio of every other trader, from Harvard MBAs to noise traders to George Soro’s hedge fund manager.�� (p. 364)

Where the book falls a tad bit short is in (1) explaining how to avoid such mistakes (Nate Silver puts all his chips on Bayesian reasoning) and (2) detailing the psychological mechanisms that give rise to mistakes (e.g., narrow framing, cognitive heuristics). One of my favorite parts of the book is the introduction, which discusses something I am fascinated with: the invention of the printing press and its consequences—namely, reducing the price of books from $20,000 to $70 and setting off the literacy revolution (after the rise of Protestantism).