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SPEAKER 1: So here's
another really useful trick
that you can use, not only to
be better bullshit detectors,
but also to get jobs.
Because this skill,
this particular skill,
thinking in orders of
magnitude, is something
that we call Fermi estimation.
Raise your hand if you've
heard about Fermi estimation.
So some of you have heard of it.
Most of you haven't.
This is based on this idea from
this physicist, Enrico Fermi,
who was really good
at estimating really
quickly pretty
complicated problems
by just using
orders of magnitude.
The idea is that if you're
way off on one side,
you might be way off on the
other, sort of balances out.
These are behind-the-napkin
calculations,
and these always show
up in interviews.
Doesn't matter which
field you're in-- whether
you're in Information School,
whether you're in business,
whether you're medicine--
Fermi estimations
come all the time.
So practice this.
So let's do a
practice right now.
This particular story
came out not too long ago.
Got a lot of attention.
And the problem that
was being stated
in the headline in the story
was that the US government
had wasted $70 million
on the food stamp program
because it was fraudulent.
So the call here was that we
should cancel the food stamp
program because of all
this waste. $70 million.
What a waste.
SPEAKER 2: Every year.
$70 million every year.
SPEAKER 1: $70 Million
every single year.
Here it is, right down here.
What a waste.
SPEAKER 2: Buy you a nice
house on the East Side.
SPEAKER 1: That's right.
That's right.
Exactly.
So let's use Fermi
estimation here
to see if we can quickly
either debunk this or say,
maybe we should can the program.
$70 million sounds
like a lot of money.
How much, in the context of
the entire food stamp program
is sort of what we're getting
at, what fraction of Americans
receive food stamps?
OK.
You know this one.
All right.
It's 10%.
Yes.
Good.
This next question is a
little bit more difficult.
How much does the average
food stamp recipient receive
annually, do you think?
$100, $1,000, or $10,000?
We won't do Poll
Everywhere because I
want to keep us going.
How many people
think $1,000 a year?
How many people
think $10,000 a year?
If you did the reading, good
job, you know the answer.
All right.
It is $1,000.
And that turns out to
be about $25 a week.
If you put $10,000, then--
actually, it should
be $10,000 over there.
We have $1,000 on there.
SPEAKER 2: It is $10,000.
It's just got the comma
in the wrong place.
SPEAKER 1: It's a weird comma.
You can be bullshitted even
with comma misplacements.
OK.
How many people are there
in the United States?
We know that there's
approximately 300
million people.
So now let's do the calculation.
We know that there are
300 million people.
We times that by the proportion,
0.1, times the amount of money
they're getting per year.
Look how big that annual
budget is for the program.
Now, take that $70
million divided by--
SPEAKER 2: $30 billion.
Yeah.
SPEAKER 1: --$30 billion.
And 0.2% of the expenditures--
you ask anyone in the
real estate business--
SPEAKER 2: Retail.
SPEAKER 1: Sorry, retail.
Real estate wouldn't
want that to happen.
They wouldn't want that
kind of loss either.
If you ask anyone in retail--
Nordstrom, Starbucks,
any of the big companies
that are in retail, they
would love the 0.2%.
They're lucky if they're
between 1.5% and 3% annual loss
to fraud.
My dad actually spent
his career in retail.
And I know that it was
actually much higher than 3%.
So a 0.2%.
That's not too bad.
Let's keep the program.
The funny sort of rest
of the story on this
is that the Department
of Agriculture
asked for a correction
on this particular story.
And it turns out-- we don't know
for sure because we don't know
the number--
we actually think it's
worse than $70 million.
But the point was here was
that this number was pulled,
basically, from nowhere.
Another story picked
another story's number.
This number sort of
started circulating around
and moved all the way up to Fox.
Watch out for these and start
practicing Fermi estimation,
and you'll get good at
doing this immediately.
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