The Signal and the Noise By Nate Silver

Book review: The Signal and the NoiseNate Silver's new book 'The Signal and the Noise' is an interesting read on statistical forecasting - with a few niggles, says Matthew Partridge.


By Nate SilverPublished by Allen Lane

"Obama aside, the indubitable hero of the 2012 US presidential election was the statistician and political forecaster Nate Silver," writes Ruth Scurr in The Guardian. His recent political projections proved to be frighteningly accurate and he has even been credited with making analysis cool.

Silver's book, The Signal and the Noise: Why So Many Predictions Fail But Some Don't, is a "lucid explanation of how to think probabilistically". The broad message is that "more modesty and effort would improve the predictive performance of everyone from the TV pundits to the political scientists".

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The book is an "achievement", agrees Business Insider's Walter Hickey. He especially likes the tone Silver "trusts the reader and doesn't try to preach or condescend". That makes this book "easily the most clear discussion of statistical forecasting for the average person available".

As the Los Angeles Times's Alex Koppelman notes, Silver isn't shy when it comes to taking on big issues, suggesting "the financial crisis might have been alleviated or even avoided if enough people had considered their assumptions more carefully and searched for the ways in which they might be wrong".

However, praise for the book isn't universal. "It's worth noting that, though undoubtedly a smart guy, his statistical polling analysis is not hugely complex or even novel," says Stephen Henderson on the blog Left Foot Forward.

Henderson also warns that his analysis can't be easily transplanted to the UK, given that polls are conducted at the national level, rather than locally (as they are in the US). As the website Political Scrapbook points out, as a result Silver was off the mark in his final forecast for the last British general election.

"The signal of Silver's own thesis tends to get a bit lost in the noise of storytelling," complains Slate's Matthew Yglesias. This "distracts from Silver's core point: there are still an awful lot of ways for predictions to go wrong thanks to bad incentives and bad methods".

He also notes that the book overlooks the fact that the author's mathematical skills aren't the key factor in his success. Instead Silver's "restless and curious mind" is "where real forecasting prowess comes from".

Princeton economist Burton Malkiel also takes issue with some of Silver's economic analysis. "I found myself unconvinced by Mr Silver's view that it should not be all that challenging' to identify financial bubbles." For example, Silver notes that price/earnings ratios were high at the peak of the technology boom, right before the stockmarket crash. But he fails to point out this was also the case at the start of the decade, right before the stockmarket shot up.

So although this is an interesting read, his arguments are weakened by the way he has "ignored all the false positives".

The Signal and the Noise: Why So Many Predictions Fail But Some Don't by Nate Silver is published by Allen Lane (£25).

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri