Tag Archives: Statistics

Risky Business

I came across the following whilst finishing my paper Scheduling in the Age of Complexity.

Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the “logic of science”; it is the instrument of risk-taking; it is the applied tools of epistemology; you can’t be a modern intellectual and not think probabilistically—but… let’s not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let’s face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).

The quote is from Nassim Nicholas Taleb, author of the Black Swan and Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute.

Read his full essay, THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS, at http://www.edge.org/3rd_culture/taleb08/taleb08_index.html and you will start to understand the current financial crisis.