The Signal and the Noise

The Signal and the Noise by Nate Silver is an interesting read about why predictions fail and how they can improve. Using current and relevant examples such as the housing bubble/stock market crash, political elections, terrorism, poker, and athlete performance, Silver turns what may be a difficult of even dull subject (statistics) into one people can relate to. Relevant to performance, my favorite anecdote came from his experience as a poker player and interviewing expert poker players.

While skill certainly plays a role in success in poker, luck also has a significant impact – particularly over the short term. One of Silver’s main points throughout the book is that predictions necessarily deal with probability rather than certainty. Unfortunately, certainty is what gets you on TV and leads to many bad predictions that can have a big impact (for example, the housing bubble being exacerbated by financial analysts certain that real estate never goes down or certain that Bear Stearns is a great investment).

Due to the vast number of opportunities (every hand is a new opportunity) poker players have, they are able to see themselves play well and win, play well and lose, play bad and lose, and play bad and win. Therefore, they are able to see that process and results are two separate things. In the short run, good results can happen with a good or a bad process. However, over the long run focusing on going through the correct process will lead to much greater success.

Following the right process is not sexy, doesn’t always get you results in the short run, and is not what you are going to hear glamorized on TV. Yet, it is the only way to achieve sustained success over the long run in whatever your performance endeavor happens to be.