The Signal And The Noise

Why So Many Predictions Fail — But Some Don't

by Nate Silver

Hardcover, 534 pages, Penguin Group USA, List Price: $27.95 | purchase

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Title
The Signal And The Noise
Subtitle
Why So Many Predictions Fail — But Some Don't
Author
Nate Silver

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Book Summary

The founder of FiveThirtyEight.com challenges myths about predictions in subjects ranging from the financial market and weather to sports and politics, profiling the world of prediction to explain how to distinguish true signals from hype.

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Awards and Recognition

13 weeks on NPR Hardcover Nonfiction Bestseller List

Note: Book excerpts are provided by the publisher and may contain language some find offensive.

Excerpt: The Signal and the Noise

The Prediction Solution

If prediction is the central problem of this book, it is also its solution.

Prediction is indispensable to our lives. Every time we choose a route to work, decide whether to go on a second date, or set money aside for a rainy day, we are making a forecast about how the future will proceed — and how our plans will affect the odds for a favorable outcome.

Not all of these day-to-day problems require strenuous thought; we can budget only so much time to each decision. Nevertheless, you are making predictions many times every day, whether or not you realize it.

For this reason, this book views prediction as a shared enterprise rather than as a function that a select group of experts or practitioners perform. It is amusing to poke fun at the experts when their predictions fail. However, we should be careful with our Schadenfreude. To say our predictions are no worse than the experts' is to damn ourselves with some awfully faint praise.

Prediction does play a particularly important role in science, however. Some of you may be uncomfortable with a premise that I have been hinting at and will now state explicitly: we cannever make perfectly objective predictions. They willalwaysbe tainted by our subjective point of view.

But this book is emphatically against the nihilistic viewpoint that there is no objective truth. It asserts, rather that a belief in the objective truth — and a commitment to pursuing it — is the first prerequisite of making better predictions. The forecaster's next commitment is to realize that she perceives it imperfectly.

Prediction is important because it connects subjective and objective reality. Karl Popper, the philosopher of science, recognized this view. For Popper, a hypothesis was not scientific unless it was falsifiable — meaning that it could be tested in the real world by means of a prediction.

What should give us pause is that the few ideas we have tested aren't doing so well, and many of our ideas have not or cannot be tested at all. In economics, it is much easier to test an unemployment rate forecast than a claim about the effectiveness of stimulus spending. In political science, we can test models that are used to predict the outcome of elections, but a theory about how changes to political institutions might affect policy outcomes could take decades to verify.

I do not go as far as Popper in asserting that such theories are therefore unscientific or that they lack any value. However, the fact that the few theories wecan test have produced quite poor results suggests that many of the ideas wehaven'ttested are very wrong as well. We are undoubtedly living with many delusions that we do not even realize.

From The Signal and the Noise by Nate Silver. Copyright 2012 Nate Silver. Excerpted by permission of The Penguin Group.