Some highlights / takeaways / thoughts / comments from #RWRI14, Day 1:
1. The best indicator of high blowup risk is stability (low volatility).
1. The best indicator of high blowup risk is stability (low volatility).
I believe this is because volatility provides us with information. So by reducing volatility, you are missing out on information, and thus accumulating hidden risks that will one day blowup.
2. Science isn't about predicting / forecasting; it's about understanding properties. You'd much rather have a deep understanding of the distribution than a single point estimate / forecast.
Example - which is more useful for someone trying to understand the real estate market: the average home price, or the distribution of home prices? The average is an (often very poor) estimate, while the distribution resembles reality.
3. Past maximum is not reflective of future maximum. The highest water level on record (as of today) will certainly be exceeded sometime in the future. So don't build assuming that the high water mark of today is the 'worst case scenario.'
Put another way: in the real world (not a casino), the true worst case scenario is always worse than any scenario that has already occurred.
