“Our contrarian question—What important truth do very few people agree with you on?—is difficult to answer directly. It may be easier to start with a preliminary: what does everyone agree on? ‘Madness is rare in individuals—but in groups, parties, nations, and ages it is the rule,’ Nietzsche wrote (before he went mad). If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth.“

—Peter Thiel

On the surface, Zero to One is a book of advice for people starting companies. It’s relevant to people outside of Silicon Valley because of Peter Thiel’s grasp on the societal trends that hold back innovation and what needs to change in order to facilitate new and better businesses in America.

Peter Thiel is a venture capitalist who co-founded PayPal in 1998 after graduating from Stanford Law and realizing that work at a big law firm wasn’t what he wanted to do with his life. After selling PayPal to eBay in 2002 for $1.5 billion, Thiel co-founded the data analysis company Planatir and was the first investor in Facebook, among other reputable companies. His opinions are challenging precisely because they are ambitious and expect more from the world than to just humming along with the status quo.

The book contains many ideas that are way too perceptive for me to come up with on my own. Among them are that there are two kinds of progress: doing new things vs. copying things that work (think innovation vs. globalization); that the dot com bubble was a moment of unbridled excitement about the future and its implosion has made companies and investors more cautious ever since; competition is the opposite of capitalism (how are you going to make money if you’re so busy competing?); that being optimistic without a definite plan is lunacy—that a better future doesn’t come without great planning and exertion, and much more. The book is a quick read, the tone is lively and the chapters are full of interesting examples that illuminate fresh ideas.

Further Links
Peter Thiel’s Vox interview with Ezra Klein: “I think “big data” is one of these buzzwords that when you hear it, you should almost always think “fraud,” because the problem is actually to find meaning within data. It’s to make big data small. That’s actually the core challenge. It’s not to collect more and more data.”
What the professionals had to say: New York Times Interview and Review of Zero To One.
Peter Thiel’s podcast interview with James Altucher.
Speech given at Stanford like the ones that inspired him to write the book in the first place.
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“I would bring a hammer.”

—Chess grandmaster Jan Hein Donner, when asked what strategy he would use against a computer

Average is Over is about where trends education and employment are headed. In brief, the book’s thesis is that people who are good at using computers will thrive while those who don’t will fall behind in just about every way imaginable.

Tyler Cowen is an academic economist at George Mason University with an active web presence. His thinking is nuanced and his politics are tough to pin down. I find his writing to be as lively and accessible as it is intellectually stimulating.

The book discusses many trends going on in the world today. Among them is that women on average tend to be better suited for the workplace in 2014, because conscientiousness is more valuable than ever and they’re more so on average than men. Good managers are in demand like never before because of the coordination required to bring together the virtually miraculous pattern of economic cooperation that everything modern comes from. Video games, rather than being a waste of time, reflect modern trends in cognition, entertainment, education, and rapid information processing. In daily life, certain tasks will be more frustrating as services become more automated (think self-check out lanes at the grocery store and talking on the phone to an automated voice recording) but those savings will ultimately lower the cost of living. There’s more, but I won’t spoil it for you.

Further Links:
Tyler Cowen’s blog: Marginal Revolution
Interview with Tyler Cowen
What the professionals had to say: Economist book review
An interesting extrapolation on the effects of inequality in everything, inspired by the book
TechCrunch YouTube interview: “It’s really going to be about motivation and grabbing people’s attention. That’s one thing that software don’t do very well is understand the human element. So if you look at Mark Zuckerberg and Facebook, of course he is a tech genius, but the real key part is how he understood psychology and how he grabbed people’s attention. Time doesn’t pile up as much as wealth does, there are only 24 hours in each day. So it’s the people who have that skill—grabbing your attention—who will be the economic winners of the future.”
Buy on Amazon: Average Is Over: Powering America Beyond the Age of the Great Stagnation

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“It is much easier after the event to sort the relevant from the irrelevant signals. After the event, of course, a signal is always crystal clear; we can now see what disaster it was signaling, since the disaster has occurred. But before the event it is obscure and pregnant with conflicting meanings. It comes to the observer embedded in an atmosphere of ‘noise’ i.e.; in the company of all sorts of information that is useless and irrelevant for predicting the particular disaster.”

-Roberta Wohlstetter Pearl Harbor: Warning and Decision (1962)

Forgive me for sounding redundant, but The Signal And The Noise is about the challenge in seeing the signal in the noise. The truth among the lies. The wheat from the chaff. The essential from the extraneous. The book is a document of human ingenuity and folly.

“This need of finding patterns, humans have more than any other animal,” I was told by Thomas Poggio, an MIT neuroscientist who studies how our brains process information.”Recognizing objects in difficult situations means generalizing. A newborn baby can recognize the basic pattern of a face. It has been learned by evolution, not by the individual.”

The problem, Poggio says, is that these evolutionary instincts sometimes lead us to see patterns that aren’t there. “People have been doing that all the time,” Poggio said. “Finding patterns in random noise.”

Nate Silver is a statistical journalist who makes predictions in sports and politics for media outlets like ESPN and The New York Times. Here, he examines the successes and failures of many industries and pastimes that are on the forefront of prediction making; including meteorology, chess, poker, epidemiology, political elections, sports, and the stock market.

The tone of the book is cautiously optimistic because the author is weary of the notion that more data makes for better predictions. Instead, he contends that more data is mostly more noise for the truth to be buried in. Things might be worse than ever, considering that humanity is generating around 2.5 quintillion bytes of data each day, exponentially more than ever before.

The human brain is quite remarkable; it can store perhaps three terabytes of information. And yet that is only about one-millionth of the information that IBM says is now produced in the world each day. So we have to be terribly selective about the information we choose to remember.

Meanwhile, if the quantity of information is increasing by 2.5 quintillion bytes per day, the amount of useful information almost certainly isn’t. Most of it is just noise, and the noise is increasing faster than the signal. There are so many hypotheses to test, so many data sets to mine – but a relatively constant amount of objective truth.

Information is no longer a scarce commodity; we have more of it than we know what to do with. But relatively little of it is useful. We perceive it selectively, subjectively, and without much self-regard for the distortions that it causes. We think we want information when we really want knowledge.

He sees the intellectual history of prediction science as a pendulum swinging back and forth between Laplace’s Demon and Heisenberg’s Uncertainty Principal. In other words, between incautious and hedonistic optimism, and the humbling realization that the future is unwritten and so cannot be foreseen.

Our views on how predictable the world is have waxed and waned over the years. One simple measure of it is the number of times the words ‘predictable’ and ‘unpredictable’ are used in academic journals. At the dawn of the twentieth century, the two words were used almost exactly as often as one another. The Great Depression and the Second World War capitulated ‘unpredictable’ into the dominant position. As the world healed from these crises, ‘predictable’ came back into fashion, its usage peaking in the 1970s. ‘Unpredictable’ has been on the rise again in recent years.

Further reading:

Excerpt from the book on FiveThirtyEight.com
Bob Lefsetz on Nate Silver
What the professionals had to say—Wall Street Journal book review
Buy from Amazon
The Signal and the Noise: Why So Many Predictions Fail — but Some Don’t

Interesting anecdotes and new vocabulary

Laplace’s Demon — A hypothetical omniscient beast that was 18th century mathematician/astronomer Pierre-Simon Laplace’s rationalization for a predictable universe that could be comprehensible to humanity if only they had enough information.
Heisenberg’s Uncertainty Principal — “How can you predict where something is going to go when you don’t know where it is in the first place? You can’t.”
Schoolhouse Blizzard 1888 —a blizzard hit that unexpectedly in the American Great Plains on January 12, 1888 on a relatively warm day. The temperature dropped almost 30 degrees in a few hours and a blinding blizzard caught people unaware. Hundreds of children, leaving school as the blizzard hit, died of hypothermia on their way home.
Lisbon Earthquake 1775 — “No type of catastrophe is more jarring to our sense of order than an earthquake. They quite literally shake our foundations. Whereas hurricanes descend upon us from the heavens and have sometimes been associated with metaphors for God’s providence, earthquakes come from deep underneath the surface and are more often taken to be signs of His wrath, indifference, or nonexistence. (The Lisbon Earthquake of 1755 was a major spark for the development of secular philosophy.) pg. 145”
Brownian noise — noise produced by the motion of particles, like a waterfall. “If you listen to true white noise, which is produced by random bursts of sounds over a uniform distribution of frequencies, it is sibilant and somewhat abrasive. The type of noise associated with complex systems, called Brownian noise, is more soothing and sounds almost like rushing water. pg.173”
Livingston Survey — an organized effort to predict economic variables like GDP.
1976 Swine Flu Outbreak — A political disaster reminiscent of the current Ebola scare. The H1N1 strand responsible for the Spanish Flu of 1918-20 and 50 million deaths kills one Army lieutenant at Fort Dix. A series of dire predictions soon followed. Gerald Ford;s secretary of health, F. David Mathews, predicted that one million Americans would die. So Ford took the resolute step of asking Congress to authorize some 200 million does of vaccine, and ordered a mass vaccination program, the first of its kind since Polio. Overwhelming majorities in both houses approved his plans at a cost of $180 million. The next flu season came and no cases of H1N1 were reported outside of Fort Dix the previous year. The Ford Administration doubled down, releasing a series of ominous public service announcements that served more to terrify the population of the government and the vaccine itself than of the flu.
anosognosia — When a possibility is unfamiliar to us, we don’t even think about it.
sibilant — (of a speech sound) sounded with a hissing.

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