Proofiness - Charles Seife [122]
29
There are supposed to be checks to make sure that this kind of monkey business doesn’t happen. Enron was audited by an outside firm, Arthur Andersen, that was supposed to ensure its basic accounting honesty. But such accounting firms have a tremendous conflict of interest; after all, they’re paid by the client whose books they’re inspecting. As a result, these accounting watchdogs either turn a blind eye to risk mismanagement or face the possibility of losing an important client. More than a decade before the Enron affair, a similar pattern emerged in the savings and loan scandal, which cost taxpayers billions. The example of Silverado Banking, a Texas savings and loan, is typical. As one article put it, “In 1985 Silverado’s auditors, Ernst & Whinney, forced the thrift to report $20 million in losses because of problem loans. Silverado’s managers weren’t pleased with that result, so they got rid of Ernst & Whinney and hired Coopers & Lybrand, which took a more flexible view of the books. In 1986, Silverado reported $15 million in profits and the managers got $2.7 million in bonuses. A year and a half later the enterprise collapsed, at a cost to the government of some $1 billion.”
30
So named because the original example concerned the English custom of having a community grassland (the “commons”) that livestock owners could use for grazing. As the story goes, in an attempt to capitalize on the free grazing land, people bought more and more livestock and overgrazed the pastures, rendering them useless.
31
As I was finishing up this manuscript, the hemorrhage showed no signs of ending. The newspapers were expressing outrage about how Citigroup had announced that it would give its twenty-five senior executives enormous bonuses, including one worth a mind-blowing $98 million, making AIG look tightfisted.
32
One I encountered this morning: “Jesus and Princess Diana lead poll of dead people we most want to meet.”
33
This might be the etymology of “straw poll,” from the method of holding up (or dropping) straws to get a better handle on the prevailing winds.
34
Polls aren’t the only way for news organizations to synthesize news. Time’s annual Person of the Year issue is a long-running exercise in pseudo-newsy attention grabbing. Top-ten and top-hundred lists are also very effective—and they seem to be proliferating rapidly.
35
Most of the time. Every election, a handful of major news outlets report astrological predictions. In mid-2008, ABC reported that astrologers predicted that Barack Obama “would win the White House in November” because Saturn was in opposition to Uranus. In 2004, Reuters quoted an Indian astrologer: “It is cosmic writ that George W. Bush cannot become President of the United States again.” These stories are often, but not always, banished to “News of the Bizarre”-type sections where journalists titillate their audiences by flirting with outright falsehoods.
36
More precisely, statistical error shrinks in proportion to the square root of the size of the sample.
37
If you are mathematically inclined, read appendix A for a fuller explanation of statistical error and margin of error.
38
If a poll has a sample size of n, a really good estimate of the margin of error is simply This is why so many polls nowadays happen to have a 3.1 percent margin of error: it corresponds to a nice round sample size of 1,000 people.
39
News organizations love to pretend that their actions are motivated by a selfless desire to serve the public good. However, as businesses, they’re more often than not prompted by corporate self-interest. Several years earlier, the Digest’s editor admitted to Congress that the polls, as expensive as they were, were “a business proposition. Attached to each postcard sent for balloting is a subscription blank for the magazine. The returns in subscriptions have been enormous and they have paid the expenses