Even though I grew up in perpetually sunny Los Angeles, I know all about the attraction of spending a chilly, winter day bundled up with a good book. I typically bounce back and forth between fiction and non-fiction, but I recently ordered two non-fiction titles that I thought would interest the Woodward Financial Advisors blog community:
The Signal and the Noise: Why So Many Predictions Fail – But Some Don’t, by Nate Silver
Silver made a name for himself in the recent presidential election based on his eerily accurate projections, though I first came to know of him through his analytical work in fantasy baseball. In this book, Silver explores the world of forecasting, which, he says, humans have a pretty bad track record of doing. (To link Silver’s baseball experience and his work on predictions, consider a quote allegedly attributed to New York Yankee legend Yogi Berra: “Forecasting is hard, especially about the future.”)
Exploring themes touched on by Nassim Taleb (The Black Swan) and Daniel Kahneman (Thinking, Fast and Slow), Silver attributes our inability to consistently produce accurate forecasts to our lack of understanding about probability and uncertainty, as well as the hard-wiring of the human brain to be overconfident about our (likely faulty) projections.
Unlike the majority of the financial services industry, Woodward Financial Advisors isn’t in the prediction or forecasting business. We’re well aware of the fact that many predictions – be they about the market, interest rates, the economy, politics, etc. – end up being wrong, which is why our investment philosophy has nothing to do with “short-term outlooks” or market timing bets. So this book is right up our ally.
Abundance: The Future is Better Than You Think, by Peter Diamandis and Steven Kotler
Diamandis might be most well known as the Chairman and CEO of the X Prize Foundation, a non-profit that conducts incentivized competitions in an attempt to inspire grand-scale innovations. Given the negativity and pessimism that dominates the news cycles these days, it was refreshing to read about the amazing amount of innovative, technological advancement that could potentially end scarcity as we know it.
In fact, Abundance and The Signal and the Noise are somewhat intertwined. We’re wired to put a lot more emphasis on recent events as we start thinking about what the future is going to be like, and a lot of the events of the past 4-5 years haven’t been very positive. But should we extrapolate that because of the financial crisis and stock market upheaval of 2007-2009 that the world will fall into permanent decay? Probably not. And yet that’s an echoing theme that we continue to hear from clients and prospects.
Hidden in all the pessimistic noise are pockets of amazing things happening, some of which have the potential to lead to a world of barely imaginable abundance. These two well-written and entertaining books would make great holiday presents for anyone interested in looking a little bit beyond the downcast headlines and sound bites.