

The art of prediction

Looking ahead

How to look ahead—and get it right

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Readers' comments



Nate silver's 2008 record certainly seems impressive and if he can replicate this consistently he would be certainly on to a winner,I am however still sceptical and would await some more verification.If he is able to pull it off, he would be on to a real big winner.

WDXMkv9Vbr in reply to femi

In 2010 he correct called 36 out of 37 senate races, 36 out of 37 gubernatorial seats and his prediction of a GOP gain of 54 seats, while off by 8, was within his confidence interval (He stated from the beginning that House races are extremely hard to call.) Apparently his sports predictions are even better.


It is a waste of time spend time reading a book like this. It is like to say that someday we are going to die, yes, but someday. The book may be quite illustrative, but it is simple, we cannot predict, we can describe some events that may occur. It is quite different to alert about something that is actually happening like the upcoming huracan, but this is very different to predict what kind of huracan is going to show up and when. Statistic is not about prediction is a description of events that historically has been happening. Prediction is not an art is just a game.

Sage57 in reply to Eliseo64

A waste of time to read a book like this?
Consider the art of predicting the path of a hurricane, it is no game to the people's lives who are in jeopardy.
Any information or instruction that improves those predictions would be considered invaluable.

Bradley Keller

My long rang predictions are about 80% accurate. I also use probabilities in attaining them. The qualifier is the content of the variables included. Our realities and our innate specie's organism is metaphysical. Not material (Mechanistic).


Thirty-odd years ago, I wrote "The Prophecy Notebook"; I looked at the real prophecies & predictions: Nostradamus, Revelation, etc. When filtered to eliminate influences known to predictor, they work.

In 2000, I wrote a newspaper article predicting, if elected, Bush would cause a recession ... and inferred he'd win. In my weekly newspaper column: six days before the Papal election, I relied upon the 12th century Irish monk, Malachy O'Morgair, and announced the name Ratzinger would assume when he was elected Pope.
Months ago, I published a newspaper article announcing the percentages Romney & Obama would receive when Obama won re-election.

In "Saint Paul's Joke", http://www.amazon.com/Saint-Pauls-Joke-Punch-Killer/dp/1469953919 , I again relied upon Malachy, and other ancient prophets, to predict events over the next 42 years ... beginning with the end of this year, and including the end of the Catholic Church, and destruction of Rome within that period.

This is not statistical probability -- but, rather, a declaration of specific dates bracketing events which will change history. The key thing being that the predictions were made centuries ago -- so are not related to current knowledge, or decision theory ... rather it is a matter of patterns recognized.

Rob S

Physical sciences are formulation of rules for prediction - where will a planet be tomorrow at 11:00:01 GMT, what will the result be of mixing hydrogen, oxygen and a spark. Physical laws allow very accurate prediction because 1) the influences on the outcome are relatively few and simple and 2) these influences are invariant with time and place.

Those constraints do not apply, however to the social world we live in. Rules that predict behavior one one place and one time differ for another place and time. Moreover, it is impossible to predict how those rules might change. Predictions of events might have been relatively easy 100,000 years ago, when we lived in a steady state world. But for the last 10,000 years we have been experiencing transient conditions - a situation that leads to notoriously poor predictions, even for relatively simple physical systems.

The example of a physical system amenable to prediction given by Silver is a counter-example. There are no rigorous physical models that predict the warming trends we see. Simplified models (CO2 causes warming) do not work and adding refinements (effects of water vapor) make the models intractable. Consequently, scientists are reduced to empirical curve fitting - predicting the future, based on intuition and a belief that the future is an extrapolation of the past.

The target of Silver's criticism also illustrates a problem with his outlook - predicting the past is easy. But, contrary to Silver, there was a great deal of confidence placed in the sophisticated tools used by those who estimated the risks associated with bundled holdings of real estate debt. After all, people had been awarded Nobel Prizes for developing these tools, and the people using them were highly talented "quants". It was the fundamental assumption that such events COULD be predicted that led to the failure, not the details of the methodology. It is this message that Taleb delivers that Silver seems to have missed. And likely purposefully, as Silver is in the business of making predictions.

Let me propose another statistical model that predicts Silver - a variation of the 10,000 monkeys typing on 10,000 typewriters model. If you ask 1000 statisticians to predict the outcome of elections, one will have the best record and one will have the worst. We will never hear of the worst. But the best will write a book telling us why.

Edward Chen

If an entity can predict the election result, that entity shall predict any human event and we shall call that entity "God".


Credit-default options... how important are those in the financial system? Or did you intend to refer to Collateralised Debt Obligations?


Probability is an interesting animal when it narrows to certainty and notoriety follows. The interesting aspect of the activity is the nature of humanity and intellect, related to specific events, trends, and unreliable certainties such as investing in stock markets. What is evident is that we, all, con ourselves into realities, we can and do, provoke unreal results from logical opportunity. Lobbying interests are an area of unreality which hilights humanity and opportunity, opportunity is a probability and one that is a god.

There is certainty in the world we have constructed. Firstly, there are cons and those who do it are legion, as are examples and those allowed to do it and those who get away with it.

There is acertainty to economic activity which is ignored. Reasons for ignorance of a quite simple certainty are obscure and l would guess that is due to significance of opportunity. Our economies, our economics, are the evolution of a concept that is easily likened to a black hole. This phenomenon was devolped :-) into serious ingenouity and practical application to finance which, in its part In the game of opportunity, underpins finance today. Myron, take a bow but don't pull your head out of the sand yet. The greeks and their application to finance (opportunity) also play a huge role in the opportunity (con) that is searching for advantage in manipulation of risk with the certainty that probability has been defeated and outcome guaranteed.

What can be deduced with certainty is that it is more that probable that overpriced assets will crash, sooner or layer. Later offers the probability thatdiminished (real or current) asset prices can be sustained while growth inflates money to fill the gap between actual and inflated asset prices. This is the certainty of economies that is being struggled with now, by those who understand the problem but cannot see it for what it is or what its inevitable outcome must be.

In a very real sense, something is worth what will be paid for it. Pretty much everything in the asset world is significantly over-priced by the accounting that values those assets contracted value.This is a function of opportunity, gross stupidity and various authorities that define our freedoms.

It is a certainty that if people cannot afford goods then the value of goods diminishes and the market will achieve equilibrium to balance in favour of profit. In situations such as that prevalent today, where a gulf exists in affordability that cannot be bridged by economic growth, bad things occuring is certainty. Probability can assess the risk that growth can accelerate a return to harmony, and a good assessment will tell that is not going to happen this time around.

herosrest in reply to herosrest

Several vast inflations are doing humpty dumpties, they are inter-related and relayed, but each quite seperate and different problems resulted from exhuberent promotion of opportunity. What once were national disasters of various proportion are converging to global phenomenon that cannot be addressed globally. Certainty or probability?

herosrest in reply to herosrest

When the cost of finance accumulates into the value of the asset it funds, disaster will eventually follow because the inflated value is unreal growth.
As example l offer YOUR mortgage and the property it bought.
It is eventually sa very logical fatal error born of opportunity. Suicide in economic terms.

SET Sail

It is not necessarily important to predict one specific future. Rather, building a small number of equally probable scenarios allows us to remain good boy scouts, estote parati :))

Shell and a bunch of other corporations have done this pretty well in laste decades, and the book "the art of the long view" by Peter Schwartz is arguably a better (shorter) read than this one.


Looking ahead is a useful corollory to The Economists discussion of growth, which blossomed across serious media into a useful consideration of what is actually going on. What is growth as it is understood. It is a very different thing to different people and that is an interesting problem.

What is the point of a 2% annual inflation target.
What is meant to inflate at 2%pa and why - why 2% and why per annum.

Is inflation, growth. Is growth inflation.

At 2% inflation, when will the cost of an item have doubled.
Will that items value have doubled in line with, or relative to inflated cost. Has the item grown.

Is the idea of growth, inflation also, a good idea.

As one should expect, there is a wealth of weighty and possibly inflated research into these matters and there are centres of gravity. https://docs.google.com/viewer?a=v&q=cache:0U_OWzDhcqQJ:www.kc.frb.org/p...

An initial conclusion based upon recent work at Harvard left me questioning the basis of their 50 year four-quater rate of PCE, which indubitably and intuitively should accumulate π√ of 404.

Does inflation generate short term unemployment - accepted wisdom is that growth generates employment but, which type of growth is it that generates employment. Cost effective employment is achieved by exporting jobs to import goods. Thus, there is a disconnect between Keynsian investment theory and businesses need to grow.

Is growing profits inflationary. It may well be but no-one asking that question remains employed or taken seriously.

Do assets inflate predictably. Is a derived contract, an asset. Is asset inflation, growth. Is asset inflation a bubble. Is an asset appreciation actuarial fact or is it growth.

If during 50 years, money grows (inflates) at 2% pa, should asset values depreciate in consequence and why is this not discussed by accountants. There is very poor logic at play under a very large carpet.

As the total value of assets increases, should not growth and inflation expectation and targets, decrease by a relative factor. Accounting is not an economic exercise but the two practices and mindsets have collided to produce utterly ridiculous stupidity.

herosrest in reply to herosrest

As happened to the Maddof venture, the world, is funding its pensions from income whilst asset prices accumulate value and income is spread thinner across a rapidly expanding claim. Something will have to give, and it will not be a pretty sight or worthwhile experience.

herosrest in reply to herosrest

Assets store value. That value must be released and harnessed for its full potential. Assets must be commoditised and freely traded to release wealth. That such endevour is essentially rigging a market is nothing less than what occurs anyway. The accumulation of asset value does not generate sufficient income. The practice is a deeply flawed accumulation of potential.


A brief look at the skyline of Las Vegas gives a feel for how poorly most are at estimating risk. Nate Silver has done a considerable service in producing an entertaining book on a subject many flee.


Best is -
-Do not look further than you can see (Churchill). This obviously does not apply to physical phenomenon like natural disasters.
-Do not multiply entities needlessly (Occam's Razor). This takes care of the surfeit of data in today's world.


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