Sunday, January 6, 2013

Best business book of 2012 - Nate Silver The Signal and the Noise



The most thoughtful book for business in 2012 was The Signal and The Noise: Why so Many Predictions fail - but Some Don't  by Nate Silver. It is on the shortlist by many, so I will not do a full review. Rather I will focus on a broad overview. Forecasting is hard. The accuracy of many is poor, but there are things you can do to be better at making predictions. Being a skeptic about forecasting does not mean that the process should not be undertaken. 

Simply put, there is a difference between forecasts and predictions. We want to improve forecast but avoid predictions. We have more data available so we should use it to provide more accurate forecasts of what is probable, yet we have to be careful about generating predictions which are likely to be wrong. Experts are not always more accurate. Be a fox and see things broadly. Do not be a hedgehog and focuses too closely in one area. Watch for biases. Think probabilistically. Use Bayes Theorem. Understand the crowd and look for consensus. Weigh qualitative as well as quantitative data. Be a skeptic. Within a signal there will be noise. Silver provides good advice in an uncertain world. 

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