From Think Like A Freak by Stephen D. Levitt and Stephen J. Dubner
Excerpt from Think Like A Freak by Steven D. Levitt & Stephen J. Dubner ©2014. Published by HarperCollins Publishers Ltd. All rights reserved.

Just as a warm and moist environment is conducive to the spread of deadly bacteria, the worlds of politics and business especially— with their long time frames, complex outcomes, and murky cause and effect— are conducive to the spread of half-cocked guesses posing as fact. And here’s why: the people making these wild guesses can usually get away with it! By the time things have played out and everyone has realized they didn’t know what they were talking about, the bluffers are long gone. If the consequences of pretending to know can be so damaging, why do people keep doing it? That’s easy: in most cases, the cost of saying “I don’t know” is higher than the cost of being wrong— at least for the individual.

Think back to the soccer player who was about to take a life- changing penalty kick. Aiming toward the center has a better chance of success, but aiming toward a corner is less risky to his own reputation. So that’s where he shoots. Every time we pretend to know something, we are doing the same: protecting our own reputation rather than promoting the collective good. None of us want to look stupid, or at least overmatched, by admitting we don’t know an answer. The incentives to fake it are simply too strong. Incentives can also explain why so many people are willing to predict the future. A huge payoff awaits anyone who makes a big and bold prediction that happens to come true. If you say the stock market will triple within twelve months and it actually does, you will be celebrated for years (and paid well for future predictions). What happens if the market crashes instead? No worries. Your prediction will already be forgotten. Since almost no one has a strong incentive to keep track of everyone else’s bad predictions, it costs almost nothing to pretend you know what will happen in the future. In 2011, an elderly Christian radio preacher named Harold Camping made headlines around the world by predicting that the Rapture would occur on Saturday, May 21 of that year. The world would end, he warned, and seven billion people— everyone but the hard- core believers—would die.

One of us has a young son who saw these headlines and got scared. His father reassured him that Camping’s prediction was baseless, but the boy was distraught. In the nights leading up to May 21, he cried himself to sleep; it was a miserable experience for all. And then Saturday dawned bright and clear, the world still in one piece. The boy, with the false bravado of a ten- year- old, declared he’d never been scared at all.

“Even so,” his father said, “what do you think should happen to Harold Camping?”

“Oh, that’s easy,” the boy said. “They should take him outside and shoot him.”

This punishment may seem extreme, but the sentiment is understandable. When bad predictions are unpunished, what incentive is there to stop making them?

Excerpt from Think Like A Freak by Steven D. Levitt & Stephen J. Dubner ©2014. Published by HarperCollins Publishers Ltd. All rights reserved.