Nate Silver book is a wonderful fact filled work that attracts you to read but lacks the interesting insight of Malcolm Gladwell or Nassim Taleb. Silver is like one of those interesting young nerds who spew out facts and interesting tidbits but fail to get to the point. Nevertheless his book is an interesting romp into the realm of statistics and probabilities. One sometimes needs to pause and wonder what he is trying to say amidst the anecdotes and stories that abound. He makes an interesting observation on people – following the common distinction between hedgehogs and foxes; alluding that foxes are good in probabilities, who are able to distinguish between the signal and the noise. It is interesting to note that distinguishing the signal against the noise is a cognitive function – perhaps the distinction between what is the right news to absorb as against trash. One would need cognitive therapy in cases involving psychological problems.
Distinguishing the signal from the noise refers to statistics specifically the probability that an event would occur. This would cover the whole gamut from weather forecasting, to polling in election, to predicting earthquakes to economic forecast. I guess it is trying to distinguish how failures in predicting and forecasting are due to receiving noise instead of receiving the proper signal. It is like saying that perceptive investors like George Soros or Warren Buffett are able to distinguish the proper signals and discard the noise to make insightful decisions that make a lot of money. Therefore distinguishing the proper signal is like accepting what is true and discarding the trivial facts. It is the quest for truth, a bull shit detector, so to speak. In the realm of forecasting, the best method would be to get the consensus from a group of experts; this consensus often comes close to the final outcome.
Refining one’s mental reasoning and perception is one way to hone the mind, to allow one to receive the right signal. Like Sherlock Holmes, one must develop a ‘global mind’ in order to have a superior deduction method that could solve mind boggling crimes. Hence, distinguishing the signal from the noise is not just a challenge of probabilistic reasoning or forecasting but a frame of mind. For economist like Silver, this would mean gleaning the correct insight from a mass of statistics or data, while perceptive people like Barack Obama or Bill Clinton or any highly smart or perceptive people, who could discern the correct reality underneath the everyday veneer. Hence, one could also do meditation or self-reflection to achieve this frame of mind as compared to a nerd who could find meaning in numbers. The fact that the mathematical abilities of most people are declining especially in the USA as compared to Asian countries like Korea or Singapore make the matter worse.
Silver’s book then is like the work of the Dalia Lama or philosophers like Eckhart Tolle, who provides guidance on correct thinking methods. To control the mind so to speak, so that the person achieve serenity and mental calm. Silver work is the extension toward the field of probability and economics. It is like predicting the probability that a man will have a car crash considering his love of drink and staying late. It is like those truthful saying like ‘a fool and his money is soon parted.’ It is deducting the outcome following logical reasoning of a Sherlock Holmes, but applied in highly complex systems like the weather or economics or political elections where highly linked components work together within a large system, integrated together. Distinguishing the proper signal from this highly complex leviathan is the aim of Silver’s book. For investors, it would be another useful tool to make the right investment decision.
Distinguishing the signal from the noise refers to statistics specifically the probability that an event would occur. This would cover the whole gamut from weather forecasting, to polling in election, to predicting earthquakes to economic forecast. I guess it is trying to distinguish how failures in predicting and forecasting are due to receiving noise instead of receiving the proper signal. It is like saying that perceptive investors like George Soros or Warren Buffett are able to distinguish the proper signals and discard the noise to make insightful decisions that make a lot of money. Therefore distinguishing the proper signal is like accepting what is true and discarding the trivial facts. It is the quest for truth, a bull shit detector, so to speak. In the realm of forecasting, the best method would be to get the consensus from a group of experts; this consensus often comes close to the final outcome.
Refining one’s mental reasoning and perception is one way to hone the mind, to allow one to receive the right signal. Like Sherlock Holmes, one must develop a ‘global mind’ in order to have a superior deduction method that could solve mind boggling crimes. Hence, distinguishing the signal from the noise is not just a challenge of probabilistic reasoning or forecasting but a frame of mind. For economist like Silver, this would mean gleaning the correct insight from a mass of statistics or data, while perceptive people like Barack Obama or Bill Clinton or any highly smart or perceptive people, who could discern the correct reality underneath the everyday veneer. Hence, one could also do meditation or self-reflection to achieve this frame of mind as compared to a nerd who could find meaning in numbers. The fact that the mathematical abilities of most people are declining especially in the USA as compared to Asian countries like Korea or Singapore make the matter worse.
Silver’s book then is like the work of the Dalia Lama or philosophers like Eckhart Tolle, who provides guidance on correct thinking methods. To control the mind so to speak, so that the person achieve serenity and mental calm. Silver work is the extension toward the field of probability and economics. It is like predicting the probability that a man will have a car crash considering his love of drink and staying late. It is like those truthful saying like ‘a fool and his money is soon parted.’ It is deducting the outcome following logical reasoning of a Sherlock Holmes, but applied in highly complex systems like the weather or economics or political elections where highly linked components work together within a large system, integrated together. Distinguishing the proper signal from this highly complex leviathan is the aim of Silver’s book. For investors, it would be another useful tool to make the right investment decision.
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