Donald Trump won. How did it happen! The world is shocked. The Hillary wave was overwhelming. Most pundits predicted a landslide win for her. 55 media publications claimed that Hillary Clinton would become the 45th President of the United States of America. Only two predicted a Trump victory. And yet…
This post is not to judge whether America made the right choice. Instead, it wonders how we missed seeing the writing on the wall, when it was so stark. How did the candidate, who won the popular vote, lose the electoral college?
You may argue that the voting system is flawed, that it was unfair on Hillary. But had Hillary won, it would have been unfair on Trump too.
There is more to this mammoth miscalculation than meets the eye.
The term Black Swan is being used to describe the Trump victory. Popularized by Nassim Nicholas Taleb, a Black Swan event has three attributes:
First, it is an outlier, lying outside the realm of regular predictions, since nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, despite its outlier status, its occurrence appears explainable and predictable in hindsight due to human nature.
In the last two decades, we have witnessed many Black Swan events. The dotcom bubble burst, the subprime crisis, BREXIT, and Donald Trump’s victory are a few examples. Each event is followed by a wave of anger and denial.
But never has a Black Swan event occurred out of the blue. Even World War II was predicted, but the world leaders refused to acknowledge it. So was the Yom Kippur War, which almost wiped out an entire generation of Israel. Economists had predicted the subprime crisis as early as 2003. Major Garrett, correspondent for CBS News, reported that Trump’s team informed him that mainstream media had got their predictions wrong. Michael Moore predicted a Trump victory about four months ago, as did Allan Lichtman.
Then why do such events catch ninety five percent people off guard?
A key reason for our incessant failure is our (poor) ability to distinguish between signal and noise. “In science”, Taleb writes in Antifragile, “noise is a generalization beyond the actual sound to describe random information that is totally useless for any purpose, and that you need to clean up to make sense of what you are listening to.”
For instance, the hiss you would hear on a telephone line, which you would try hard to ignore so that you could focus on the interlocutor’s voice. In this scenario, the hiss was noise, and the interlocutor’s words were the signal.
The more you look at data and opinions, the more noise (and less signal) you absorb.
Say you look at inflation figures on a yearly basis. At the end of the year, Taleb explains, the ratio of signal to noise is one to one – half the information is about real improvement or degeneration, while the other half comes from randomness. But if you look at the same data daily, the composition changes to 95 percent noise and 5 percent signal. Continue looking on an hourly basis, and the composition further deteriorates: 99.5 percent noise and 0.5 percent signal.
We thought some banks were too big to fail. But they did. Just like that, we think we are too intelligent to get ‘swayed’ by inaccurate or manipulated information from the media. But we rely on the same media for all our insights and opinions. Social media has made this noise ubiquitous. Thus, we eventually become too stupid to think for ourselves. Like most people overestimate their driving skills, most of us overestimate our intelligence while formulating an opinion.
Think of the number of times you have read (and shared) information on social media, which turned out to be false.
I’m not boasting that I can predict Black Swan events. Because I can’t. But it’s easier for me to be surprised (rather than rudely shocked) at outcomes – in daily life and global events. Some lessons have worked for me, and I would like to share them with you. Hopefully, they will help you develop a better view of the world around you and accelerate your quest for inner peace.
1. Accept the Truth
The truth about an event is never reported by just one side. In fact, bright chances are that you will never know the complete truth about an event. But you can make Charles Munger’s first rule of wisdom a truth, and accept it:
“The first rule is you can’t really know anything if you just remember isolated facts and try and bang ‘em back. If the facts don’t hang together in a latticework of theory, you don’t have them in usable form.”
The central idea of this point is to accept that you don’t (and probably will never) know everything. So keep your mind open to changes in opinion.
2. Reduce Intake of Information
Taleb states, “anyone who listens to news (except when very, very significant events take place) is one step below sucker.” This applies to social media too, today.
The Fear of Missing Out (FOMO) looms large in us. We are always online, reading and sharing opinions, the majority of which stems from popular media channels. Consuming news every hour (whether on TV or social media) causes 99.5% noise.
Ration your supply of information. It’s tough in this age, but is bitter medicine the patient needs. Access news a few times a day. Let that news be about a diverse set of events, not a specific one.
3. Avoid Anchoring
It’s not like the media doesn’t offer alternate perspectives. But we don’t listen, thanks to anchoring, an inherent cognitive bias in human beings.
Wikipedia describes anchoring as our common tendency to rely heavily on the first piece of information offered (the ‘anchor’) while making a decision. It often goes hand-in-hand with the cognitive bias of the focusing effect, where people place too much importance on one aspect of an event, causing an error in accurately predicting the utility of a future outcome.
For the US Elections, people anchored to the New York Times, which declared that Hillary Clinton had a 98.999 percent chance of becoming President. It lulled people into complacency. Anchoring to a belief led Eli Zeira to ignore the signs of a looming attack from Egypt and Syria in 1973 and caught Israel unprepared for the Yom Kippur War. This despite the Prime Minister of Israel and MOSSAD repeatedly questioned him for almost six months.
Most people are not as upset about Trump’s victory as they secretly are with themselves, because an opinion they anchored to, went horribly wrong. The next few steps will explain how you can avoid anchoring.
4. Consider Possibilities
Now that you accept you don’t know everything, and don’t want to anchor to the first piece of information you receive, get comfortable with ambiguity.
“The test of first-rate intelligence”, F. Scott Fitzgerald wrote, “is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.”
Don’t just ask yourself if there is an alternate possibility. Hunt and explore it. Ask yourself, “what if I’m wrong?” Don’t form an opinion just yet. It’s dangerous. Weigh both possibilities in your mind and wait for events to unfold.
Gradually, the perspective which accurately predicted how things would unfold will make itself evident. This will help you create filters and mental models in your mind for later use.
5. The Most Important Question
When an unprecedented event occurs, you have two choices: you can live in denial and declare that everyone else is wrong. Or, you can ask yourself ‘why’ it occurred.
Most of us miss the writing on the wall because we choose the former. Hence, when we anchor to an opinion and the opposite occurs, we cannot ask ourselves – ‘Why’. Instead of dissecting the event, we let our bias color our judgement.
When something transpires, regardless of whether it went your way or not, accept it. Then, ask yourself “why” it occurred. Look for explanations you missed, and the underlying pattern that defined it.
You won’t remain a passive observer. Asking yourself ‘why’ will enable you to observe and orient i.e. form educated perspectives. This will strengthen mental models in your mind. The more mental models you form, the more you see the world as it is, and the more your intelligence grows.
It’s tough – almost impossible – to predict Black Swan events. They surprise everyone. Of course, most are shocked or gutted, while a few remarkable individuals can brag with an “I-told-you-so”.
Being surprised is fine, but being caught off guard means we were looking in the wrong direction, and must work on ourselves. As mentioned earlier, no Black Swan event has not been predicted.
The world is far more intricate than you imagine. Almost never will it function the way you want, because an incomprehensible number of variable are involved. Even genuine experts get many predictions wrong. But they don’t sulk. Instead, they learn from the event and develop more cogent mental models. Let’s learn from them.
To become better at orienting events in daily life and in the world, don’t anchor to lopsided opinions. Ration your consumption of information, and open your mind to possibilities. Don’t hold on to your ship even when it’s sinking. Accept that you don’t, and will never, know everything.
You can continue clutching on to outdated philosophies, and rely on inaccurate sources for opinions. You can soak in all the noise, feel depressed or anxious, spew venom, and talk in paradoxes on social media.
Or, you can improve your ability to predict outcomes exponentially. The majority will not agree with your opinion. That’s okay. This ability will not just imbibe acceptance in you. It will also increase your happiness levels.
It’s now up to you to decide how you want to live your life.