Words&Dirt

“Memories? They towered over everything else. Yet he could not understand them. He could not understand the details. He could not even understand the emotions, except as inane simplifications––joy, laughter, wonder, fear and icy-steel determination. Now, he was lost in those memories, wandering like an idiot in a cathedral. Not understanding, cowering before icons.”

––A Fire Upon the Deep, by Vernor Vinge, loc. 4574-81

“When economists talk about risks, this is what they mean: outcomes that they can precisely control with the use of probabilities. These are central to modern economics, and to the models that economists build. The idea is that participants in a market know the range of possible future outcomes, assign probabilities to them, and then act on them. Mathematical models of this economic sort of risk are central to modern finance. Many of them are things of great beauty and complexity, but it is an unfortunate fact, made clear by the credit crunch, that a lot of them are also wrong. That was because the people making the models had confused risk, where you can assign precise values to probabilities, with uncertainty, which is very different: uncertainty can’t be modeled and consists of the kinds of events that are very unlikely but nonetheless happen all the time. The seductive power of the idea that we can manage risk, and assign numbers to it, led very clever people to make the mistake that we can also also control uncertainty––a different thing altogether.”

––How to Speak Money: What the Money People Say––And What It Really Means, by John Lanchester, pg. 198-9