Prince Rahul's Key Ideas from Freakonomics
by Steven D. Levitt

• Steven debunks the myth that drug dealers are all rich. In reality, crack gangs are very similar in structure to any business in corporate America, with a small number of people on the top making big money and hundreds of people on the bottom barely scraping by at all.
• These people stay in the business because of the prospect of potentially moving up and making it big one day, which is the mentality that drives people like athletes and entertainers trying to move up as well.

• Because of high-stakes testing, schoolteachers in Chicago public schools were incentivized to change their students' answers on test answer sheets so that they would not be fired or penalized for the poor test scores.
• Similarly, sumo wrestlers in Japan are incentivized through bribes and social incentives to cheat and throw certain important matches (to allow other wrestlers to win) so other wrestlers do not drop in the rankings.

• Parents are more afraid of gun than of swimming pool. But there is 1 child drowning per every 11,000 backyard pools (550 drownings per year from 6 million pools) compared with 1 child killed for every 1,000,000+ guns (175 child deaths per year from 200m+ guns in the US).
• By these numbers, swimming pools are 90 to 100 times more dangerous to children than guns
• We human are horrible at assessing risks.

If we feel in control, we view things as safer. We prefer to drive a car than fly, even though there are far more deaths from car crashes than from plane crashes. When we’re in the driver’s seat we feel in control, but in a plan we relinquish all control to the pilot, so it feels riskier.

We weight the things that could kill us now more heavily than the things that could kill us in the future. A terrorist can kill us right now, but eating too much McDonald’s won’t kill us for a few decades.

We see the news stories of the horrific plane crashing into the side of a mountain or the kid playing with a gun that accidentally goes off, so these feel more likely compared to the guy who fell asleep in a car and quietly veers off the road or the child who drowns in the pool without any news coverage.

A simple equation might be: Risk = Hazard + Outrage

• Stetson Kennedy, a man who infiltrated the 1940s KKK and published much of their secret information, thereby erasing the informational advantage they had that made people fear them.
• Real estate agents also have an informational advantage over their clients, and they often use this to their advantage, selling houses for less than they are worth so that they can close a deal quickly because they have less to gain from a higher sale than the sellers do.

• Parenting methods that entail specific actions (such as taking one’s child to museums, spanking the child, reading to the child every night, etc.) play little to no role in the child’s development, whereas there are many parental qualities (such as the parents’ level of education, their age at the time of having children, etc.) that have a demonstrable influence on a child’s development.
• Such data suggest that genetics plays a larger role in a child’s development than parental nurture does.

• Chances are, we’ve all been cheated at one point or another, probably by a repairman who overcharged us or an expert who gave us bad advice. Experts have an informational advantage over the average person.
• Experts often abuse information asymmetry between themselves and consumers, but things like the internet are working to erase this information imbalance by providing more information to everyday people.