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I am currently preparing a presentation about the value of more complex (specically: non-Gaussian) statistical inference. I thought it might be interesting to start the presentation with a small real-world example about disasters or mistakes caused by over-ambitious simplification.

Unfortunately, it quickly turned out that there do not seem to be that many stories about statistics disasters, which came as quite a suprise to me. One story I found relates the 2008 financial crash to the oversight of fat-tailed interactions caused by using Gaussian copula models. That's already not bad, but there must be better anecdotes. Do you know of any other entertaining/interesting stories in which statistical simplifications or errors led to unexpected results?

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    $\begingroup$ Not exactly, but the famous conversation in "Ball Four," where the manager disses stats, saying, "If my pitcher had one leg burned off and the other frozen off, you'd say 'on average he was fine' " $\endgroup$
    – Carl Witthoft
    Mar 17, 2021 at 11:49

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"Gambler's Ruin" would seem to be the one which pervades both Las Vegas and Wall Street to this day.

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  • $\begingroup$ Could you explain how it involves mistakes based on Gaussian modeling? It does not seem to be obvious. $\endgroup$
    – Conifold
    Mar 17, 2021 at 20:42
  • $\begingroup$ @Conifold I posted this as a general example, not specific to a particular statistical analysis process. Sorry for the confusion $\endgroup$
    – Carl Witthoft
    Mar 18, 2021 at 11:35

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