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Norwegian rats
Old 03-06-2009, 02:00 PM   #1
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Norwegian rats

First we had the Norwegian Widow being discussed in financial circles, now we have the Norwegian rat.


Philip Tetlock is a professor of organizational behavior at the Haas Business School at the University of California-Berkeley and in an interview with Money Magazine he talked about why financial experts get things wrong so often.

Philip Tetlock on expert predictions on the economy - Feb. 18, 2009

Of course. Like all of us, experts go wrong when they try to fit simple models to complex situations. ("It's the Great Depression all over again!") They go wrong when they leap to judgment or are too slow to change their minds in the face of contrary evidence.

And like all of us, experts have a hard time with randomness. I once witnessed an experiment that pitted a classroom of Yale undergrads against a lone Norwegian rat in a T-maze. Food was put in the maze in no particular pattern, except that it was designed to end up in the left side of the "T" 60% of the time. Eventually, the rat learned always to turn left and so was rewarded 60% of the time. The students, on the other hand, fell for a variant of the "gambler's fallacy." Picture a roulette player who sees a long sequence of red and puts all his money on black because it's "due." Or more subtly, he looks for complex, alternating patterns - the same kind of mental wild-goose chase that technical stock pickers go on. That's what happened to the Yalies, who kept looking for some pattern that would predict where the food would be every time. They ended up being right just 52% of the time. Outsmarted by a rat.
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Old 03-06-2009, 04:51 PM   #2
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Don't we have a Norwegian Rat who posts on this forum -and who is right about 60% of the time ?
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Old 03-06-2009, 05:19 PM   #3
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Don't we have a Norwegian Rat who posts on this forum -and who is right about 60% of the time ?
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