Monday, January 22, 2018

Book Review: 'The Signal and the Noise' by Nate Silver

The Signal and the Noise: Why So Many Predictions Fail — but Some Don’t
Nate Silver
The Penguin Group (2015)
How and why, more often than not, “human judgment is intrinsically fallible”
Note: The review that follows is of the Paperback Edition
This book was first published in 2012, at a time when Big Data (or if you prefer, big data) was only beginning to receive the attention it deserves as a better way to use analytics within and beyond the business world.
In the years that followed, as Nate Silver notes in the Preface to the paperback edition, the perception that statisticians are soothsayers has proven to be an exaggeration, at best, and a dangerous assumption, at worst. This new edition “makes some recommendations but they are philosophical as much as technical. Once we’re getting the big stuff right — coming to a better [i.e. more accurate and more reliable] understanding of probability and uncertainty; learning to recognize our biases; appreciating the value of diversity, incentives, and experimentation — we’ll have the luxury of worrying about the finer points of technique.”
In the Introduction to the First Edition, Silver observes, “If there is one thing that defines Americans — one thing that makes us exceptional — it is our belief in Cassius’ idea that we are in control of our own fates.” In this instance, Silver refers to a passage in Shakespeare’s play, Julius Caesar, when Cassius observes:
“Men at some time are masters of their fates.
The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings.”
(Act 1, Scene 2, Lines 146-148)
Cassius’ assertion has serious implications and significant consequences. It is directly relevant to a theory named after Reverend Thomas Bayes (1701–1761), who first provided an equation that allows new evidence to update beliefs in his An Essay towards solving a Problem in the Doctrine of Chances (1763). Silver: “Bayes’s theorem is nominally a mathematical formula. But it is really much more than that. It implies that we must think differently about our ideas [predictions, for example] — and how to test them. We must become more comfortable with probability and uncertainty. We must think more carefully about the assumptions and beliefs that we bring to a problem.”
Silver cites another passage in Julius Caesar when Cicero warns Caesar: “Men may construe things, after their fashion / Clean from the purpose of things themselves.” According to Silver, man perceives information selectively, subjectively, “and without much self-regard for the distortions this causes. We think we want information when we want knowledge.” I take “want” to have a double meaning: both lack and desire. Silver goes on to suggest, “the signal is the truth. The noise is what distracts us from the truth. This is a book about the signal and the noise…We may focus on those signals that advance our preferred theory about the world, or might imply a more optimistic outcome. Or we may simply focus on the ones that fit with bureaucratic protocol, like the doctrine that sabotage rather than an air attack was the more likely threat to Pearl Harbor.”
Whenever an unprecedented disaster occurs, there may be doubt that we are in control of our fate. Nate Silver offers this reminder: “But our bias is to think we are better at prediction than we really are. The first twelve months of the new millennium have been rough, with one unpredicted disaster after another. May we arise from the ashes of these beaten but not bowed, a little more modest about our forecasting abilities, and a little less likely to repeat our mistakes.”
Perhaps but I doubt it. Recent evidence suggests otherwise.

Editor's note: This review was written by Robert Morris and has been published with his permission. Like what you read? Subscribe to the SFRB's free daily email notice so you can be up-to-date on our latest articles. Scroll up this page to the sign-up field on your right. 

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