When RMSE Lies: Why Your AI Model Might Be Quietly Mispricing Risk
Opening — Why this matters now Most AI models today don’t just predict outcomes — they predict uncertainty. And yet, oddly enough, we still judge them as if they don’t. In finance, healthcare, and infrastructure, the difference between “slightly wrong” and “catastrophically wrong” is rarely symmetric. But the metrics we use — RMSE, $R^2$ — behave as if all errors are created equal. This is not just a technical oversight. It’s a structural blind spot. ...