Here I could not help seeing in the person of George Will the representative of so many nightmares in my career; my attempting to prevent someone from playing Russian roulette for $10 million and seeing journalist George Will humiliating me in public by saying that had the person listened to me it would have cost them a considerable fortune.
The journalist, my bete noire, entered this book with George Will dealing with random outcomes. In the next step I will show how my Monte Carlo toy taught me to favor distilled thinking, by which I mean the thinking based on information around us that is stripped of meaningless but diverting clutter. For the difference between noise and information, the topic of this book (noise has more randomness) has an analog: that between journalism and history. To be competent, a journalist should view matters like a historian, and play down the value of the information he is providing, such as by saying: "today the market went up, but this information is not too relevant as it emanates mostly from noise." He would certainly lose his job by trivializing the value of the information in his hands. Not only is it difficult for the journalist to think more like a historian, but it is alas the historian who is becoming more like the journalist.
For an idea, age is beauty (it is premature to discuss the mathematics of the point). The applicability of Solon's warning to a life in randomness, in contrast with the exact opposite message delivered by the prevailing media-soaked culture, reinforces my instinct to value distilled thought over newer thinking, regardless of its apparent sophistication --- another reason to accumulate the hoary volumes by my bedside (I confess that the only news items I currently read are the far more interesting upscale social gossip stories found in Tatler, Paris Match and Vanity Fair --- in addition to The Economics). Aside from the decorum of ancient thought as opposed to the coarseness of fresh ink, I spent some time phrasing the idea in the mathematics of evolutionary arguments and conditional probability. For an idea to have survived so long across so many cycles is indicative of its relative fitness. Noise, at least some noise, was filtered out. Mathematically, progress means that some new information is better than past information, not that the average of new information will supplant past information, which means that it is optimal for someone, when in doubt, to systematically reject the new idea, information, or method. Clearly and shockingly, always. Why?
The argument in favor of "new things" and even more "new new things" goes as follows: look at the dramatic changes that have been brought about by the arrival of new technologies, such as the automobile, the airplane, the telephone, and the personal computer. Middlebrow inference (inference stripped of probabilistic thinking) would lead one to believe that all new technologies and inventions would likewise revolutionize our lives. But the answer is not so obvious: here we only see and count the winners, to the exclusion of the losers (it is like saying that actors and writers are rich, ignoring the fact that actors are largely waiters --- and lucky to be ones for the less comely writers usually serve French fries at McDonald's). Losers? The Saturday newspaper lists dozens of new patents of such items that can revolutionize our lives. People tend to infer that because some inventions have revolutionized our lives that inventions are good to endorse and we should favor the new over the old. I hold the opposite view. The opportunity cost of missing a "new new thing" like the airplane and the automobile is miniscule compared to the toxicity of all the garbage one has to go through to get to these jewels (assuming these have brought some improvement to our lives, which I frequently doubt).
Now the exact same argument applies to information. The problem with information is not that it is diverting and generally useless, but that it is toxic. We will examine the dubious value of the highly frequent news with a more technical discussion of signal filtering and observation frequency further down. I will say here that such respect for the time honored provides arguments to rule out any commerce with the babbling modern journalist and implies a minimal exposure to the media as a guiding principle for someone involved in decision-making under uncertainty. If there is anything better than noise in the mass of "urgent" news pounding us, it would be like a needle in a haystack. People do not realize that the media is paid to get your attention. For a journalist, silence rarely surpasses any word.
On the rare occasions when I boarded the 6:42 train to New York I observed with amazement the hordes of depressed business commuters (who seemed to have preferred to be elsewhere) studiously buried in the Wall Street Journal, appraised of the minutiae of companies that, at the time of writing, are probably out of business. Indeed it is difficult to ascertain whether they seem depressed because they are reading the newspaper, or if depressive people tend to read the newspaper, or if people who are living outside their genetic habitat both read the newspaper and look sleepy and depressed. But while early on in my career such focus on noise would have offended me intellectually, as I would have deemed such information as too statistically insignificant for the derivation of any meaningful conclusion, I currently look at it with delight. I am happy to see such mass-scale idiotic decision-making, prone to overreaction in their post-perusal investment orders --- in other words I currently see in the fact that people read such material an insurance for my continuing in the entertaining business of option trading against fools of randomness.