This is a series of posts featuring anecdotes from the book The Signal and the Noise by Nate Silver. Read the Chapter 1 post here.
Chapter 2 of The Signal and the Noise focuses on why political pundits are so often wrong. When TV channels select for those making crazy predictions, it turns out accuracy rates go way down. You can either get bold, or you can be right, but very rarely can you be both.
Basically, networks don’t care about false positives….big predictions that don’t come true. What they do care about is false negatives….possibilities that don’t get raised. They consider the first just understandable bluster, but the second is unforgivable. So next time you wonder why there’s so many stupid opinions on TV, remember that’s a feature not a bug.
Read all The Signal and the Noise posts here, or go back to Chapter 1 here.
I’ve been reading Nate Silver’s “The Signal and the Noise” recently, and pretty much every chapter seems to lend itself to a contingency matrix. Each chapter is focused around a different prediction issue, and Chapter 1 is around the housing bubble and the incorrect valuation of the CDO market.
I wasn’t going to get in to CDO ratings, but here’s the housing bubble:
It should be noted that swapping the word “home” in the title for any other product describes pretty much every market bubble ever. Color scheme taken from the cover art of the hardcover version, or maybe the Simpsons.
See all The Signal and the Noise posts here, or go to Chapter 2 here.