It exposes an interesting flaw in people's thinking where they hear percent and immediately convert it to a binary (75% -> Yes, 29% -> No). If pressed most would probably claim to understand that 75% means "every 4th time we see this it won't work" and 29% "nearly every 3rd time it will", but in my experience most people act more appropriately for the binary outcome than the probabilistic one.

Thinking and acting to the probability model is almost a superpower; I keep finding I'm ready for 1 in 10 style events that other people don't see coming. After being told authoritatively there is a 10% chance of it happening, no less. Eg, I will look at what a 1:100 year rain event in an area will cause then make long term decisions around it.

Yes, this drives me nuts.

I'd also say that when viewing something like a "1:100 year rain event" to understand that it's just a model there, and not always the actual probability, and to try to understand what limitations might exist. Climate change is likely making some events like that more frequent for example.

I think there is an additional problem with "1 in 100 year" events: it looks so small that a lot of people don't realize that they are more likely than not to see it in their lifetimes.

It depends on framing. Most people would decline to play Russian roulette even with a 100 chamber cylinder with but a single live round.

Of course they would. What have they got to gain?

Now put a prize in there and I might well play.

So if you know of 10 different events which may occur with probability 10% each, you would prepare for exactly one of them?

I think it's clear that there are some events that may be rare but which are cheaper to plan ahead for than to deal with after the fact, and vice versa (e.g. for many people self insuring against minor losses like appliance failures makes sense).

Here are some risks I'd like you to maybe prepare for:

A: 10% chance you lose 100$. Preparing costs 5$

B: 10% chance you lose 100$. Preparing costs 15$

C: 10% chance you lose 200$. Preparing costs 15$

D: 10% chance you lose 200$. Preparing costs 30$

E: 10% chance you win 100$. Ticket costs 20$

F: 10% chance you win 100$. Ticket costs 5$

You prepare for A & C. You buy tickets for F

Think of it like choosing when to fold in poker

It's useful to think that way, until you add more options:

G: 5% chance one of your parents die, preparation costs $X

H: 3% chance you die, preparation costs $Y.

What at what values of $X and $Y do you prepare?

Refusing to answer the question doesn't mean you won't have to make that decision. Better to've considered these questions ahead of time. People run into this when they haven't decided how much they're willing to pay before putting their pets down

The 5%/X 3%/Y question is also hard to answer since one also has to consider how much is it mitigating, if I survive with chronic pain or something then that loses value. Assuming full mitigation:

I'd be willing to pay ~16000$ to skip a 1/30 chance of death (valuing ~480000$ to live ~50 years, or 9600/year being-alive tax)

For my parents I'd be willing to pay ~9000$ to skip a 1/20 chance of one of their's death. (valuing ~180000$ for them to live ~30 years, or 6000/year being-alive tax)

I posted a comment saying "a common mistake is thinking 10% = No" and you've responded by with something that looks a lot like "you're making a mistake thinking 10% = yes".

My suggestion is you don't have enough information to claim I'm making any specific mistake.

You prepare for a 1 in 10 chance event which other people don't prepare for; i.e. is you act exactly as if you think it will certainly happen, but you tell yourself you don't think it will certainly happen?

This sounds like a distinction without meaning. Using "people mistake my preparation for me believing that it will happen, so they are dumb" is weird. You're acting as if you think it will happen, of course people think you think it will happen. Why else would you bother preparing? You're not buying 10% of the sandbags you'd need, you're buying 100% of them because nothing else would do.

"Oh but I'm smarter" but your belief is leading you to take the same actions as the person who thinks 10% == yes, so in what way is it smarter? In what way is it different?

> You prepare for a 1 in 10 chance event which other people don't prepare for; i.e. is you act exactly as if you think it will certainly happen, but you tell yourself you don't think it will certainly happen?

"Prepare for" is not the same thing as "think it will certainly happen". It's a case of making your cost-benefit calculations appropriately. You don't do all the things that you'd do if you thought it was 100% going to happen, you do a cheap subset.

I bought 2 bottles of hand sanitizer and 2 reusable n95 facemask and some filters in mid January.

I didn't think I'd need it - I thought it'd end up like SARS or h1n1. But it cost me $30 or something and I can afford to lose that so why not.

I bought some Bitcoin fairly early. I thought it was stupid but there was a small chance I was wrong.

In both these cases if I'd been sure I'd have acted very differently!

I'm unsure about a lot of things so sometimes I try to get on both sides of a subject.

> so in what way is it smarter? In what way is it different?

As Alexander said repeatedly, it's cost-benefit analysis. See my other post in this thread.

If you go through life only preparing for the things you are certain will happen, you are quite likely to experience some avoidable unpleasantness.

This doesn't answer my question. If you prepare for it, then you are acting as if you think it will happen. That is, if you thought it would definitely happen you would do the same thing you are doing now, therefore the two states are indistinguishable except for the story in your head - and the main point about the story seems to be "I don't think it will happen therefore I'm better than the people who do think it will happen, even though we are both expending the same effort, doing the same preparations, to avoid the exact same problem"

Chanting "cost benefit analysis" doesn't change anything.

> If you prepare for it, then you are acting as if you think it will happen.

That isn't the case. Preparation isn't a binary state either - people can be more or less prepared for an occurrence. The estimated likelihood of an event changes how much time and effort should be spent preparing to it.

There is a big difference in how people behave if they thing there is a 0%, 0.05% or 98% chance of being mugged when they go outside for example. The 0.05% case would rationally start avoiding people late at night or not carrying valuables. The 98% person would not go outside.

> This doesn't answer my question.

Of course, if you persist in dismissing everything that makes a difference, then you will never figure out what the difference is.

You are being inconsistent in the way you presume (mostly mistakenly, I believe) various opinions and motives on the part of Scott Alexander, while attempting to reject opinions, motives and rational thought as being relevant to the behavior of people who prepared for C19.

> Chanting "cost benefit analysis" doesn't change anything.

Well, I agree that "chanting" (i.e. explaining to someone who will not listen, apparently) will not change anything (and least of all your understanding of the issues), but actually practicing cost-benefit analysis effectively does make a difference - as we can see, for example, in the difference in how C19 is progressing in South Korea and in Britain.

Are you absolutely sure you are across all the flaws in my character and decision making process after my 2 short comments? You've got practically no idea at all how I approach planning and you're already telling me a bunch about myself that I never said.

> "Oh but I'm smarter" but your belief...

Case in point.

The article says Nate Silver had Trump's chances at a little worse than 1 in 3. The average person is going to sit through 17 presidential elections.

I don't have to be very clever to say that Trump winning is totally consistent with the model; and anyone who was caught by surprise has failed to understand probability. 29% is not saying no chance of victory and it isn't really that surprising. It isn't even a forecast of defeat if you think about it. It is evidence that a defeat was likely, but a modeled probability is not a forecast - it is evidence used in forecasting.

I'm really claiming that most people will hear "10% chance of disaster!" then after it didn't pan out 9 times they'll start talking about the boy who cried wolf or stopped clocks when the disaster strikes the 10th time. I have a massive advantage over them, because that is exactly the wrong attitude towards probabilities.

> Surely if you’re ready for more than 10% of 1-in-10 events, your probabilities are just as wrong as other people’s.

Not necessarily; as Alexander mentioned repeatedly, it depends on the cost of repeatedly preparing unnecessarily versus the cost of not being prepared that one time it happens.

Just about the whole of aviation safety, to give one extended example, is based on this principle.

> Surely if you’re ready for more than 10% of 1-in-10 events, your probabilities are just as wrong as other people’s

Disagree, it depends how much it costs to be ready, and how much it costs to be unprepared if the 1-in-10 event happens.

> I can open any thread on HN regarding economics and the general level of arrogant ignorance is staggering.

This is a problem very generally -- and is significantly exacerbated by the highly-polarized nature of our society at present. Right now, virtually anything interesting becomes a part of the political identity fight immediately -- and once that happens, reinforcing the narrative is more important than anything else. Not just by people actively trying to advance the narrative -- but because people collectively only talk to other people from their tribe, and so they get facts and "facts" that fit the narrative.

The Coronavirus is no exception. In early February, it was a Republican/Right position that the Coronavirus was dangerous and a Democrat/Left position that Coronavirus fears were an excuse to hate Asian/Chinese people.

Ironically, now, in April, it's a Republican/Right position that Coronavirus fears are dramatically overblown / a crisis being exaggerated for political or economic gains, and it's now a Democrat/Left position that the Coronavirus is a near-existential level threat that requires the strongest response possible.

These positions were initially formed from data, but once the narratives are chosen, partisans do what partisans do -- and since basically everybody is hyperpartisan now, that means we get where we are.

There was fight in February about closing fights specifically with China (but not from Europe which was already affected and not testing travellers), calling virus Chinese virus.

Republicans back then however also claimed it is under control and not much if threat and definitely did not advocated for any measures (testing, masks, making people stay at home, closing public events) except closing direct flies from China.

There was no observable flop between the two parties positions.

Democrats can simultaneously believe that 1.) calling virus China virus and closing exactly direct flights is mostly about racism and pushing blame from own inaction 2.) virus is threat, crisis and country needs to act in other ways.

Republicans can simultaneously believe it is nothingburger no worst then flu exaggerated by Democrats for political reasons and then call it China virus.

This seems to be a particularly American issue. Even in the UK post Brexit it hasn't happened. There has been the odd gentle prod but in general the opposition has supported the stance taken by the government.

The UK opposition party has been supportive, but I can't say the same thing about the press or their supporters in the general population - that's still really hyper-partisan and has imported a bunch of the US narratives as well.

Yes, the UK press has been terrible. Surprisingly (or maybe not) the best coverage seems to have come from the business press.

That's not a good thing given the awful response that the UK government has had.

America has become this extremely polarized place the last 10ish years where everybody know that "the other side" are actually monsters.

If you are a Democrat, you think of Republicans as Nazis and white supremacists. If you're a Republican, you think of Democrats as authoritarians and communists.

Naturally, once you "know" that the other side is the party of pure evil, you know that whatever the propose, you must oppose. (Even if you're a politician who doesn't really believe this, you wouldn't want to be seen as agreeing with monsters).

A related problem is that nobody trusts our institutions and processes. Republicans mostly believe that the Democrats have built their power primarily on vote fraud and the support of the media. (Things like the big push for extended time mail-in ballots and "ballot harvesting" which produce ballots with no chain of custody feed these fears of vote fraud). Democrats mostly believe that Republicans have built their power on secret backroom deals with foreign powers and a collection of billionaires (there have been a variety of investigations into folks' dealings with Russia in particular.)

As a result nobody much cares about preserving the norms or the niceties -- only winning the fight of the moment.

If you're an American, you can likely point to one or two things that "the other side" did that started this process -- my Republican friends and my Democrat friends each tell me about what the enemy did to start the fight. (Republicans are more likely to use the word 'war', but they both tend to see it as an existential struggle for our continued freedom)

Against that background of hate and distrust, every action is seen as obviously being the worst possible thing.

I know plenty of (smart) Republicans who know for certain that coronavirus lockdowns are part of a premeditated plan to finally end liberty and install a new communist dictatorship in November (that's why mail in balloting is holding up the coronavirus relief bill -- Democrats need to make sure they can vote fraud their way to 100% control before we demand to be let out of our houses).

Before you tell me that they aren't smart, I also know some very smart and capable Democrats that believe that Republicans want to reopen states like Michigan because the only people who will go back to work in big numbers will be the poor and minorities, and the entire goal of the coronavirus response was to use it as best as possible to "liquidate" the poor and brown people, so that the rich who control Republicans can have lower taxes and lots of vacant property to buy up for cheap. That's also why the borders are closed -- they believe that is intended to be permanent and in both directions, since Republicans hate foreigners.

These that I have presented are the "strong" versions of the beliefs I've encountered. They're not universal, but the hate and distrust implied by them is nearly universal.

I am presumably not an exception, though the (unusual) fact that I keep members of both parties in my social circles helps keep me able to see both perspectives clearer than most seem to.

Where do you bet? Betting markets like predicit?

Yes, PredictIt. I didn't want to say it because I don't think anyone here who is feeling stressed about money should consider it an option. I had a least a year or more of practice on a play money site, Hypermind, which has real money prize pools.

I looked into the economics of PredictIt a few years back.

* Fees are high. They charge 10% of profits and and additional 5% for withdrawals.

* Markets were illiquid. There aren't enough shares available to put much money to work. There's an $850 limit per bet, but it's hard to reach that amount.

* Bets can take a long time to settle. So even if you are 90% certain of something trading at 50%, you can't put a ton of money into that view, nor can you necessarily get paid quickly.

* Occasionally bets are determined by dumb technicalities. As I recall the bet for Powell being the next Fed chair settled on No, because the date referenced in the bet was a holiday or something, and he was confirmed on the next business day.

If you are smart enough to make significant money on PredictIt aren't you smart enough to make more money doing almost anything else?

> Fees are high.

Yep. I was skeptical about if they were beatable initially.

> Markets were illiquid.

Not always true. This varies a lot between markets. If you look at the Democratic nominee markets, you can buy as many shares you like.

> $850 limit

This is per bracket. So you can max No on several candidates in a market if you want, and PI also refunds the amount that is impossible to lose since only one can resolve as Yes. There are also a lot of correlated markets that are effectively the same bet. You can bet on Biden being the nominee at least 4 different ways if you want.

> Bets can take a long time to settle.

You can sell at any point in time. No need to wait. There are long and short term markets.

If there was something 50% that was 90%, I'd have no problem taking that bet. But it's something like a 2020 election you can always wait until closer to the election. Though some markets appreciate during that span of time.

> dumb technicalities

> Powell being next Fed chair

Always read the rules. All predictions are useless without a time.

Powell market was free money. The good players were telling people the correct answer in the comments for months but people didn't want to listen. Amazing.

> aren't you smart enough to make more money doing almost anything else?

That's what I was aiming for before the economic shock, but it's not like people think "Oh you won money at bet on politics? Here is job"

Any advice on how to get better at making predictions?

I second stevenwliao's recommendation of Superforecasting by Philip Tetlock. It's a good intro. It might seem unsatisfying in that there is no single thing that makes one good, and he basically refers to it (appropriately) as good judgement. But it highlights a lot of basic areas.

Practice is also good. If you're not used to probabilistic thinking you'll need to develop that intuition and calibration.

Anything about how to think about things better is going to be useful. There's a Coursera course called Model Thinking that is might be useful. Just being curious about things in general and pushing yourself outside of your normal areas of competency/interest.

It might seem weird, but I find Twitter to be pretty essential these days. There are a lot of smart people freely sharing information and some don't mind answering questions.

There's an awesome book about getting better at predictions called "Superforecasting"

https://www.goodreads.com/book/show/23995360-superforecastin...

The idea is to make lots of time-limited, falsifiable predictions with percentage estimates attached and check your track record.

>If you are smart enough to make significant money on PredictIt aren't you smart enough to make more money doing almost anything else?

Don’t underestimate the value of domain specific knowledge and the costs of lacking it. Just because you know how to count cards doesn’t mean you know how to deal cards, how to run a casino, or most importantly, how to avoid getting caught.

The domain knowledge is freely available for the overwhelming majority of markets but it's usually not enough to provide an edge.

Sure, but you usually don’t know what you don’t know. More pertinent to jobseeking, you don’t know who you don’t know.

"I am currently supporting myself by betting on politics and economics."

So what do you think of the stock market rebound?

Historically I've stayed away, and view index funds as the way to go. I have no training in finance or stock valuation. It's easier for me to think about probabilities than what the pricing of Tesla means.

The rebound does seem like early overconfidence, but could be a bet on the fact that public corporations are more likely to get bailouts than not. I hope the markets are right that it's more than that. But markets seem to do a lot of dumb things over the short and medium term.

Where do you bet for money to "support yourself"? Good Judgment Open doesn't have cash awards.

Had they made that bet with out options in mid to late feb they could be a millionaire.

For political bets you can bet on betting sites. Much harder to earn an income though.

This is one of the rare times that I obviously should have done just that, but usually it's hard (for me at least) to really think of ways to carry some forecast over into the stock markets.

Yeah I’m kicking myself over it. I knew enough to withdraw my money from the market on the 24th (took the decision the 22nd on a weekend).

But I literally forgot about puts. I was under the impression you had to be an accredited investor.

I was thinking about withdrawing on the 20th/21st of feb, when spread happened in Korea and Italy locked down some northern towns. Puts were still very cheap then.

I try not to beat myself over things like this but it's good to explore why I didn't make a decision and absorb any lessons.

Yeah I did the latter. Now I know how the relevant instruments work if another such opportunity arises.

Although market reaction is fundamentally hard to predict. It caughy many by surprise that markets reacted positively when Trump was elected. Or when there’s 150k people dead from coronavirus.

Prediction markets. https://en.m.wikipedia.org/wiki/Prediction_market

Stock markets and futures exchanges can be reasonably modeled as placing bets, too.

I'm aware of them. None of them let you bet (for money) on the number of COVID-19 cases with a % likelihood like OP describes.

True story: Intrade let you bet on the swine flu count, as reported in major media sources, and I bet that there would be 50,000 cases in the US by the end of June 2009. Then they changed it to "CDC official count" before the bet resolved, and the CDC decided to stop updating it, so I lost the bet even though there were 50k cases by the terms of the original bet.

Were they allowed to do that under the terms of the contract or something like that? If not, it sounds like fraud. If so, it sounds like a way to never make any significant payouts...

Not like I could sue, since it was hosted in Ireland :-(

And in effect they could do whatever they wanted.

I still play on GJOpen if not only because the variety of topics is greater but I also like some of the players there and what they have to say. Brier score approaches also feel more rigorous.

I overall agree with the tone of this post. It's as if everyone who feels smugly clever is sitting around a TV broadcast with horrible static (this is the old school type with rabbit ear antennae), yet a whole slew of them are certain they can see and hear clearly exactly what is happening. To put this in different terms, we have witnessed the media, government officials, "elites," HN commenters, etc. partake in the high-status equivalent of millenarian preachers emphatically predicting the rapture (repeatedly), but this time with human lives in the crosshairs.

In fact, I think the only criticism that can be leveled at these groups are ignorance of risk mitigation strategies and cost-benefit analysis. More or less what Scott put in his post. (Short aside: the mask calculus seemed incredibly obvious to me from the start. I was not embarrassed to wear a mask on a flight back east from CA in late February, but I did hear about my stupidity from quite a few of the aforementioned. Including my wife. Who knows if the masks work, but the critics failed critical thinking 101. They're all Goofi. Except my wife.)

With that in mind (and at the risk of indulging in what might consider "arrogant ignorance"), I would like to gently push back on this sentence:

> We're on target to massively screw up the economic relief, which will make the economic stimulus phase all the more challenging. People need to be more predisposed to having possible intellectual and knowledge blind spots.

What specifically are you referring to? Is the rescue plan doing too little? Too much? No effect? Is Congress making uncertainty worse by not replenishing the fund for small business loans? Are they even a good idea?

The problem is no one can say much of anything about this crisis because it's unprecedented. We haven't had a financial crisis or some spontaneous crash in asset prices. The shock came from the real economy first, at least as far as I can tell. I debate with my economist friends (most of whom have advanced degrees in the subject beyond my B.S.) about whether this is even mostly a supply or demand shock. The opinion is mixed (two economists -> three opinions). I've probed what policy responses should be enacted from a variety of perspectives, or what economic recovery looks like. All over the map again.

I've been a bit more optimistic than most, since I see this as primarily a demand shock starting with entertainment, travel and hospitality and then spreading to other sectors (enforced by fiat). Keynesian response might be quite effective. And the rescue plan is quite close to what Keynes himself wrote in ch. 24 of the General Theory: nationalized investment and income redistribution to those with the highest marginal propensity to consume. But my assumptions could be way off. It could be that this thing really was a supply shock through and through, or that debt of all types really has been untenably high, or that there are serious problems that have arisen in the real economy as a result of the crisis.

I do find that alongside degrees of confidence (which is a good mental cold shower for making bold claims) some skin in the game is useful as well. (Mine is that I have a $10 bet with a friend that $DIS will be above $120/share on August 1 (might lose that one) and that I've moved a few grand from cash into the market at times during the past 7 weeks or so.) I really appreciate that you gave a clue that you have made some bets, but I'd be curious as to what those are. That would represent some skin in the game as well, and reflect your beliefs about what the economic problems will be.

I will say I know a lot more about economics, but I was a lot more confident that an epidemic would occur than I am about any particular short-run economic outcome.