Author Archives: Nick

The Signal and the Noise 2 – Nate Silver

The Signal and the Noise (reviewed last time) is one of many books that cite’s Philip Tetlock’s work on expert predictions, and so I thought there might be value in summarizing that work here. Tetlock is a professor of psychology and political science, and in the 80s, he started collecting predictions from experts across academia and government on a variety of topics. What he found was that the experts were about as good at predicting the future as random chance. Experts were better than undergrads, but still absolutely rubbish, and worse than just assuming the status quo would persist.

That’s the headline result, but there are also some extensions. The most commonly cited of these is the idea of hedgehogs and foxes, from the title of an essay by Isaiah Berlin discussing Tolstoy. He, in turn, took the title from a Greek poet; “The fox knows many things, but the hedgehog knows one big thing.”

In the context of predictions, what Tetlock found was that Hedgehogs (experts who focused on a single big idea, and specialized heavily) were significantly worse at forecasting than Foxes (experts who have a plethora of little ideas, and are often multidisciplinary). Unfortunately, hedgehogs are the ones who go on tv – why ask experts who think there are two sides to an issue when you can have panelists who think everything looks like a nail? Big, bold predictions may be usually wrong, but they’re exciting, and that’s what matters for a public intellectual.

Takeaway: experts don’t have much to tell us in predicting the future (though have significant value in other ways, one hopes), but adaptable experts with breadth have at least a little more to tell us than heavily specialized ones do. In the end, humility about what we can predict and what is predictable may be our only option. 

The Signal and the Noise – Nate Silver

“Distinguishing the signal from the noise requires both scientific knowledge and self-knowledge: the serenity to accept the things we cannot predict, the courage to predict the things we can, and the wisdom to know the difference.”

The Signal and the Noise got a lot of hype when it was released, partly because Nate Silver correctly predicted 49 of the 50 states in the American presidential election, again. The book itself is wide-ranging, covering not just politics but financial crises, baseball, the weather, economics, flu, chess, poker, global warming, and a host of other issues. In all of them, Silver examines the state of the industry in terms of its use of data and its ability to predict the future. His broadest lesson, though, is that the modern world is flooded with data, almost overwhelmed with it. As he correctly points out:

“The number of meaningful relationships in the data – those that speak to causality rather than correlation and testify to how the world works – is orders of magnitude smaller. Nor is it likely to be increasing at nearly so fast a rate as the information itself; there isn’t any more truth in the world than there was before the Internet or the printing press. Most of the data is just noise, as most of the universe is filled with empty space.”

At the core, his solution is humility about what we can predict and what we can understand about the world, no matter how much data we have. More formally, he argues for Bayesian thinking – when we make a prediction, he suggests, it should never be a single value, but instead a probability weighting of various outcomes. It is not possible, he argues, to make predictions with data abstracted from context: we must understand how the data works, not just observe it, as stock market quants might argue.

Statistics is not exactly a mass-market topic, and Silver has done an admirable job making his book accessible to the general public. I flipped through the chapter on baseball, but I imagine other readers might well do the same to the chapter on economic forecasting: to each their own. Generally, however, his examples are great fun, whether on how people predict (or don’t) earthquakes, how poker players calculate opponents hands, or the development of chaos theory by Lorenz as he sought to predict the weather. He is also a dab hand at phrasing, and there are almost too many good lines to pick one to quote. Even if you don’t directly work with data, your life is affected by it in a myriad of ways, and it’s worth understanding the limitations of our knowledge.

John A: The Man Who Made Us – Richard Gwyn

“Macdonald made us by making a confederation out of a disconnected, mutually suspicious collection of colonies, and by later magnifying this union into a continental-sized nation.”

This is part 1 of Gwyn’s classic biography of the first Prime Minister of Canada, John A MacDonald; part 2 is on my shelf, so I imagine a review of that will appear in time. For non-Canadians reading, I provide this interesting fact: The Wealth of Nations was published in 1776, the year of the American Revolution, while Das Kapital (Pt 1) was published in 1867, the year of Canadian Confederation. 

A worry of mine with biographies is that they can sometimes feel like they’re trying to cut the subject down to size. A key role of biographies is to explore the weaknesses as well as the strengths of an individual, but to try to insult Napoleon’s strategic sense, for example, seems to me to reveal more about the biographer than the biographee.

Fortunately, Gwyn’s biography of John A Macdonald does none of that. Instead, it is an insightful, well researched analysis of a great man who is often considered one of the Fathers of Canada, but was also a raging alcoholic, happy to distribute appointments to his friends and to buy support, and at best mediocre father of his actual child. My only criticism is that for an international reader, it might feel too Canadian in its focus, but as a biography written for a Canadian audience, that’s hardly a surprise.

It explores themes both large and small: from how the origins of Canada lie with the first alliance between French and English politicians, which John A would wholeheartedly adopt, to how he appears to have coined the word Shero for a female hero. It also studies John A himself, arguing his greatest strength was his practicality, in contrast to Lincoln’s idealism, which allowed John A to understand the lives of the people of Canada as they were actually lived.

Summarizing the history of Canada in a blog post is a bit beyond my brief, and so instead of attempting to do so I’d say for those interested in Canadian history and even world history of the time (John A traveled frequently to the UK for political reasons, and as a contemporary of Lincoln the book also takes on the Civil War, though from a Canadian perspective), the book is an exciting read. For those of us who experienced high school Canadian history, which seemed to suggest that the only thing that happened in Canadian history was something about coureurs de bois, the book is almost required reading. 

Plus, John A’s a fun guy! When accused of being drunk (he was – he repeatedly threw up in the House of Commons), he replied “Yes, but the people would prefer John A. drunk to George Brown sober.”

The Price of Civilization – Jeffrey Sachs

“In our crowded and unstable world of 7 billion people, we need to dial down the propaganda and relentless shrieking of the mass media and reconnect with more basic human values. We need…to refocus our attention as individuals, consumers, and virtuous citizens, to what is most important in bringing us economic fulfillment and well-being.”

Disclosure first: I find Jeffrey Sachs somewhat frustrating. To my mind, his Millennium Villages project is an embarrassment – there’s no shame in starting a project that doesn’t work, but to refuse to release data to try to prevent others from finding out and continuing to support it damages the entire development movement (See Freakonomics blog, Wikipedia, etc.). It perhaps makes me unfairly cynical when he calls for government transparency and reform, so keep that in mind.

With that preamble, I found his book disappointing. I picked it up because the thesis sounded great, that the cause of America’s woes was a moral failure in its elites. I think this is an underdiscussed topic: the change in moral norms over the past 50 years means what once would be socially unacceptable, such as accepting an enormous salary and spending it entirely consumption, is now routine. In Ancient Rome, the wealthy were expected to spend most of their fortunes on public works, and did so because that was the norm. In some ways I like that model of the world: I think contributing to our communities is enormously important. I don’t know how to get there from here though: increasing taxes coerces contributions, which may be useful but is I think different from people wanting to contribute on their own. Anyway, despite Sach’s thesis statement, that’s not what the book is about.

The book focuses on ideas Sachs has introduced before. If this is your introduction to the subject, this or his earlier books are useful: he’s left wing but not partisan, believing both democrats and republicans are terrible. If you’ve spent a while thinking about the issues or read his other books though, there’s not much new here. He lists the classic problems facing the US, economic, political, social, and psychological, and then possible solutions, with a focus on increased taxes on the wealthy and mindfulness by citizens, and people engaging with the process. He has some suggestions I really enjoy, like requiring the US President to spend a few minutes every State of the Union outlining how the policies he’s mentioned will affect Americans 50 years from now, but most feel well-worn.

He ends with the idea that it will all sort itself out because the Millennial generation is socially liberal (in the American sense) and ethnically diverse.  He may well be right in that, and he’s certainly right on some of the other issues, but I’m not sure I got much out of the book. It all felt just a bit too standard for my taste.

The Economic Naturalist – Robert H Frank

“Mathematical formalism has been an enormously important source of intellectual progress in economics, but it has not proved an effective vehicle for introducing newcomers to our subject.”

The Economic Naturalist is one of the many pop-economics books out there, perhaps the most famous of which is Freakonomics. It’s one of the ones I haven’t read though, so I thought I’d pick it up, and I was pleasantly surprised. Frank used to instruct his students each year to find a seeming puzzle in the world and explain it with economics, the best of which have been collected here. If somewhat basic, it is at least entertaining.

Frank opens by worrying that economics students rarely remember what they are taught: associating economics with math and diagrams, they can’t actually apply it to the real world. Seeing as how this is a current subject of debate in the profession (see the Economist), I can hardly argue. Econ provides basic concepts of considerable value, and if students don’t leave with some understanding of opportunity cost, comparative advantage, etc., then I’m not sure it matters how good they are at calculus.

The entire book, then, is questions asked by his students and answers in response to them, often based on the original essay the student wrote. Questions vary from why drive-through ATMs have braille on them (cheaper not to produce different ATMs for drive-throughs )  to why milk is sold in square containers and pop in round ones (milk requires refrigerated shelf space, and so needs to be packed on shelves as efficiently as possible: pop is carbonated, and round shapes are more solid).

The essays are fun and in some cases enlightening, and are organized around key economic concepts, to illustrate their application in the real world. After the first half or so though, it all gets a bit wearing. To be fair, I suspect that’s because I already know the concepts; for a newcomer in the field, it might be considerably more entertaining. Still, I’m not sure it competes with the like of Tim Harford’s Undercover Economist, or Freakonomics for that matter. An entertaining read, but I think I’d rather read more about economics education directly. For those with less background in economics though, it might be a fun introduction to the field.

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The Wealth and Poverty of Nations 2 – David Landes

“The one lesson that emerges is the need to keep trying. No miracles. No perfection. No millennium. No apocalypse. We must cultivate a skeptical faith, avoid dogma, listen and watch well, try to clarify and define ends, the better to choose means.”

I gave broad thoughts on David Landes’ Wealth and Poverty of Nations earlier this week, but today I’m going to try to give a flavour of the kind of broad themes he talks about. This, I think, is the real strength of the book: the breadth of scope and insight it brings to bear,

The kind of broad questions he tackles are not thought about enough, I think. Sung China had mechanized power in ironmaking; Europe had windmills; early modern Italy had shipbuilding. Why didn’t they have an Industrial Revolution? Why did England? And why in the 18th century?

He argues it occurred in the UK for 3 reasons. The autonomy of intellectual inquiry, the method and language of understanding science and discovery, and the invention of invention (the routinization of research), all, he argues, contributed to England’s success. Other countries in Europe had obstacles to development, holdovers from the medieval period like serfs, guilds, and trade barriers, while the UK led the way in changing those institutions to suit the new economy. In addition, he gives some credit to Max Weber’s Protestant work ethic, though he is equally happy to credit a Buddhist work ethic that emphasizes the same virtues. A follower of any religion can have the virtues of hard work, self-discipline, etc., he points out, but perhaps the incentives were higher for Protestants.

Most of us have heard of the industrial revolution, but it’s the uncommon book that can really capture the industrial evolution from mechanized textiles, which led to steel through a focus on process, which led to dyes made with coal byproducts, which would in turn spawn modern chemistry, of critical importance to World War I. After that, food refrigeration and processing would further modernize and globalize the world, and the rest, as they say, is history.

Something he doesn’t appear to be familiar with is some work I’ve seen by Bob Allen, the economic historian at Oxford. He has built estimates of real wages for labour in countries around the world for much of history, and argues a key driver of the location of the industrial revolution was the price of labour. In the UK, the return to adopting a spinning jenny was 40%, because the employees it replaced were so expensive: in India, the return was negative 4%, because labour was cheap. I suspect Landes would happily agree with this as a driver, so it was a shame it didn’t appear he’d seen it.

For me, his thoroughness on the industrial and colonial periods is his greatest strength, and he does well to spend considerable time on other regions, like South America and Asia. The one notable exception is Africa, which though mentioned in reference to other regions is given little time itself. It’s possible he left it out due to time, but it is an unfortunate absence. For perhaps the same reason, his concluding chapters feel weak. Still, for the middle chapters alone, the book may well be worth it.

If you do want that deep knowledge of how rich countries developed their wealth, you get can the book here (or in the UK or Canada). Or, just subscribe to the Subtle Illumination email list!

The Wealth and Poverty of Nations – David Landes

“The Industrial Revolution brought the world closer together, making it smaller and more homogenous. But the same revolution fragmented the globe by estranging winners and losers. It begat multiple worlds.”

If I had been asked what I thought 100 pages in, I would have been quite negative, I think. Landes attempts to write an economic history of the world, and in his first hundred pages or so he covers pre-industrial revolution. It felt disorganized: he has vast knowledge of the subject, but the interjections and tangents were overwhelming, and I am dubious about the accuracy of some of them.

Once he got onto the era of the Industrial Revolution though, he began to shine. His chapters on Japan (he argues that had Europeans not intervened, they might well have had an industrial revolution of their own – I had no idea that because early Japan guaranteed riparian cultivator rights so strongly, they actually built boat-mounted waterwheels!) are fascinating, and he does well to focus on finding the reasons why things happen, instead of ascribing historical events to chance. His studies of colonial powers are equally interesting, highlighting differences between the different powers and their influences in a comprehensive way that is not done enough. Where else can one learn that early England was mostly about privateers and piracy rather than colonies, and as a result the crown issued sailor uniforms without pockets so they couldn’t steal things from the captured ships before the crown got its share?

In some ways it’s a good but weaker precursor to Why Nations Fail: Landes too emphasizes institutions, though he also gives credit to geography, culture, and other factors. His knowledge, however, is considerably more comprehensive, and flipping to any point in the book can reveal an enormous depth of knowledge on the subject at hand (Galileo was in trouble for the same reason inexpensive pornography used to be banned in Italy: such things were fine for those with refined tastes, but not appropriate for the masses. Galileo published in Italian, not Latin). That can be both fascinating and frustrating, but it’s certainly impressive.

Overall, then, I’m impressed. I might skip the first few chapters and the last few, but the middle is well worth the read. Whether that means the book is worth reading overall, I suppose, depends on how much of a hurry you’re in: I’d suggest Why Nations Fail as a speedier, but less comprehensive and content-rich, alternative.

If you do want that deep knowledge of how rich countries developed their wealth, you get can the book here (or in the UK or Canada). Or, just subscribe to the Subtle Illumination email list!

The Art of War – Sun Tzu

Having reviewed Good Strategy, Bad Strategy earlier, I thought it might be worth posting some quotes from Sun Tzu’s Art of War to provide some balance – there’s nothing like going back to the classics, after all.

Deception

 “All warfare is based on deception.”

“Hold out baits to entice the enemy. Feign disorder, then crush him.”

Leadership

“Confront your soldiers with the deed itself; never let them know your design. When the outlook is bright, bring it before their eyes; but tell them nothing when the situation is gloomy.”

“At the critical moment, the leader of an army acts like one who has climbed up a height and then kicks away the ladder behind him. He carries his men deep into hostile territory before he shows his hand.”

Victory

“To fight and conquer in all your battles is not supreme excellence; supreme excellence consists in breaking the enemy’s resistance without fighting.”

“The clever combatant imposes his will on the enemy, but does not allow the enemy’s will to be imposed on him.”

“Numerical weakness comes from having to prepare against possible attacks; numerical strength, from compelling our adversary to make these preparations against us.”

“In war, the way is to avoid what is strong and to strike at what is weak.”

“In raiding and plundering be like fire, in immovability like a mountain.”

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Good Strategy, Bad Strategy – Richard Rumelt

“The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.”

John Kay (the British economist, not the guy who invented the flying shuttle) recently came out with his five book recommendations on economics in the real world. Since I hadn’t read it, I thought I’d pick up Good Strategy, Bad Strategy.

Overall, I’m impressed. Rumelt is an academic who studies strategy, and his clarity and insight does him credit. All he wants is structured thinking, and his book reads like a how-to tutorial: though he usually applies it in the context of business or national defense, it could equally relate to strategy in almost any field. CEOs often read things like Sun Tzu’s Art of War, and this book comes as close as any I’ve read to making that seem reasonable.

Rumelt is worried that much of what is done today is bad strategy, for which he has a specific definition. Bad strategy correlates with fluff, a failure to face core challenges, mistaking goals for strategy, and bad strategic objectives. Too many businesses, he points out, have a strategy of having 20% growth in sales for the next 5 years. That’s not a strategy – it’s at best a goal, and quite possibly wishful thinking.

Strategies are made up of three things. First, diagnose the problem. Second, come up with a guiding policy. And third, derive a set of coherent actions that allow you to implement that guiding policy. Too many organizations neglect the first and third steps, and are thus far too vague in doing the second. A doctor, in contrast, diagnoses a problem, chooses a therapeutic approach as a guiding policy, and then recommends specific medicines, diets, and therapy as a result of the guiding policy.  Action is the key to strategy: goals and theories are only part of the story.

A lot of the book feels straightforward, or at least not complicated. As Rumelt points out, however, in a world where we are often increasingly focused on the short term, there is value in forcing ourselves to think strategically. Consultants, he suggests, are not valuable because they suggest you write a checklist: they’re valuable because you actually write one when they suggest it, when otherwise you might never get around to it. I’m not sure I learned anything revolutionary while reading, but I did think deeply and in new ways about strategy and how we make decisions.

Both as a breakdown of how to think about strategy and a source of fun stories about business, Good Strategy, Bad Strategy does well. Perhaps a little too long and repetitive in parts, but it was well worth the read, and I suspect would be even more useful for someone directly involved in business.

If you want to pick up Good Strategy, Bad Strategy yourself, you can get it here (or in the UK or Canada). Or, join the subtle illumination email list and absorb strategy from reading!

The Language Instinct 2 – Steven Pinker

“A language is a dialect with an army and a navy.” – Max Weinreich

Today, just a few choice quotes on language. You can go here for the actual book review.

On Oranges

Orange comes from the Spanish Naranja – originally, the word was norange. Over time, however, ‘a norange’ became ‘an orange’. The same reason is why Ned is a short form of Edward: ‘Mine Edward; became ‘My Nedward’. Or, if you didn’t know why Shakespeare used ‘nuncle’ as an affectionate name, the same reasoning applies – ‘mine uncle’ to ‘my nuncle’.

On Western Languages

The Proto-Indo-Europeans were an ancient group who took over Europe, Turkey, Iran, Afghanistan, Northern India, China, and Western Russia, with a few small exceptions, and are the reason many Western languages seem to have similar words for many nouns: they’re all based on the same root. They’re also the reason English has irregular verbs like shake/shook: in Proto-Indo-European, pluralisation came from changing the vowel in word, not using an s. Based on the enormous area they covered, scientists speculate they represent either an enormous military culture, or the advent of farming, which would have allowed for cultural dominance.

An exception: the Basque Region in Spain, who must have resisted their hegemony somehow and maintained their own language.

On the Passive Case

English teachers always tell us not to use the passive: Pinker fights back. Passive can actually reduce the complexity of sentences, he explains, by reducing how much information you have to hold in memory to understand it.

“Reverse the clamp that the stainless steel hex-head bolt extending upward from the seatpost yoke holds (trace) in place”

“Reverse the clamp that (trace) is held in place by the stainless steel bex-head bolt extending upward from the seatpost yoke.”