hard to beat, even in the crude terms of the first statement, would be a lot bet ter than nothing.

The problem comes when we mistake the approximation for the re ality. Ideologues like Phil Tetlock s hedgehogs behave in this way. The simpler st atements seem more universal, more in testament to a greater truth or grander th eory. Tetlock found, however, that his hedgehogs were very poor at making predic tions. They leave out all the messy bits that make life real and predictions mor e accurate. We have big brains, but we live in an incomprehensibly large univers e. The virtue in thinking probabilistically is that you will force yourself to s top and smell the data slow down, and consider the imperfections in your thinking. Over time, you should find that this makes your decision making better. Know Wh ere You re Coming From Bayes s theorem requires us to state explicitly how likely we bel ieve an event is to occur before we begin to weigh the evidence. It calls this e stimate a prior belief. Where should our prior beliefs come from? Ideally, we wo uld like to build on our past experience or even better the collective experienc e of society. This is one of the helpful roles that markets can play. Markets ar e certainly not perfect, but the vast majority of the time, collective judgment will be better than ours alone. Markets form a good starting point to weigh new evidence against, particularly if you have not invested much time in studying a problem. Of course, markets are not available in every case. It will often be ne cessary to pick something else as a default. Even common sense can serve as a Ba yesian prior, a check against taking the output of a statistical model too credu lously. (These models are approximations and often rather crude ones, even if th ey seem to promise mathematical precision.) Information becomes knowledge only w hen it s placed in context. Without it, we have no way to differentiate the signal from the noise, and our search for the truth might be swamped by false positive s. What isn t acceptable under Bayes s theorem is to pretend that you don t have any p rior beliefs. You should work to reduce your biases, but to say you have none is a sign that you have many. To state your beliefs up front to say Here s where I m comi ng from 12 is a way to operate in good faith and to recognize that you perceive real ity through a subjective filter. Try, and Err This is perhaps the easiest Bayesi an principle to apply: make a lot of forecasts. You may not want to stake your c ompany or your livelihood on them, especially at first.* But it s the only way to get better. Bayes s theorem says we should update our forecasts any time we are pr esented with new information. A less literal version of this idea is simply tria l and error. Companies that really get Big Data, like Google, aren t spending a lot of time in model land.* They re running thousands of experiments every year and te sting their ideas on real customers. Bayes s theorem encourages us to be disciplin ed about how we weigh new information. If our ideas are worthwhile, we ought to be willing to test them by establishing falsifiable hypotheses and subjecting th em to a prediction. Most of the time, we do not appreciate how noisy the data is , and so our bias is to place too much weight on the newest data point. Politica l reporters often forget that there is a margin of error when polls are reported , and financial reporters don t always do a good job of conveying how imprecise mo st economic statistics are. It s often the outliers that make the news. But we can have the opposite bias when we become too personally or professionally invested in a problem, failing to change our minds when the facts do. If an expert is on e of Tetlock s hedgehogs, he may be too proud to change his forecast when the data is incongruous with his theory of the world. Partisans who expect every idea to fit on a bumper sticker will proceed through the various stages of grief before accepting that they have oversimplified reality. The more often you are willing to test your ideas, the sooner you can begin to avoid these problems and learn from your mistakes. Staring at the ocean and waiting for a flash of insight is h ow ideas are generated in the movies. In the real world, they rarely come when y ou are standing in place.13 Nor do the big ideas necessarily start out that way. I t s more often with small, incremental, and sometimes even accidental steps that w e make progress. Our Perceptions of Predictability Prediction is difficult for u s for the same reason that it is so important: it is where objective and subject ive reality intersect. Distinguishing the signal from the noise requires both sc ientific knowledge and self-knowledge: the serenity to accept the things we cann ot predict, the courage to predict the things we can, and the wisdom to know the

difference.14 Our views on how predictable the world is have waxed and waned ov er the years. One simple measure of it is the number of times the words predictab le and unpredictable are used in academic journals.15 At the dawn of the twentieth century, the two words were used almost exactly as often as one another. The Gre at Depression and the Second World War catapulted unpredictable into the dominant position. As the world healed from these crises, predictable came back into Nate Silver (2012-09-04T14:00:00+00:00). The Signal and the Noise (Kindle Locati ons 7696-7742). Penguin Group, USA. Kindle Edition.