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Pseudo-events and mistaking signal for noise.
Welcome back to our (brief?) series looking at a few more practical implications of this work. Last week, we talked about taking responsibility in the communities and arenas we are involved in, rather than looking to those already in leadership to solve.
This week, we turn our attention to news media and their biases.
Sorry to disappoint right off the bat; what I don’t plan to do is to tell you about the ideological biases of news media that you may take in. What is often unexamined is the notion that the fact that we have news media as they are today biases them to certain types of content.
We are in great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas, it may be, have nothing important to communicate... We are eager to tunnel under the Atlantic and bring the old world some weeks nearer to the new; but perchance the first news that will leak through into the broad flapping American ear will be that Princess Adelaide has the whooping cough.1
So what happened? Maine and Texas figured out things to talk about.
Moreover, as other media expanded to carry information, more content was needed to fill them. As I can attest to in my weekly quest to write this newsletter, finding quality content is hard. Necessarily, as the frequency of publishing rises, the bar for what constitutes noteworthy things to share must fall.
Lance Strate can give us some additional context:
The medium motivates the content. Daniel Boorstin (1978) explains how the introduction of a new media soon requires the manufacturing of new content to fill it with. For example, the introduction of mass-circulation daily newspapers followed the invention of steam-powered printing in the early 19th century led to the creation of what Boorstin called pseudo-events, events that are set up only to provide content for news media as opposed to events that would have happened anyway; examples of pseudo-events include interviews, publicity stunts, press releases, press conferences, news leaks, as opposed to an earthquake, airplane crash, or war. The introduction of the World-Wide Web in the early 1990s created so much demand to fill online pages that content became a buzz word for several years, and the void was eventually filled by blogs, wikis, podcasts, image and video sharing, and other forms of user-generated content and social media.2
This brings to mind a passage from Fooled by Randomness by Nassim Nicholas Taleb. In a passage in Chapter 3, Taleb is describing the realities of how the stock market needs to perform for an investor to get a 15% annual return:
A 15% return with a 10% volatility (or uncertainty) per annum translates into a 93% probability of success in any given year. But seen at a narrow time scale, this translates into a mere 50.02% probability of success over any given second… Over the very narrow time increment, the observation will reveal close to nothing.3
So to translate that, you have a roughly 93% chance of success to have a 15% return with 10% volatility in any given year. Not bad odds!
But as we make the time scale smaller, the chance of things being meaningful towards that bigger return becomes smaller and smaller. Per the chart in his text:
For any quarter, you have a 77% chance.
For any month, down to 67%
For any day, 54%
All the way down to for any given second, 50.02%
So, if you are trying to determine if you are going to achieve your 15% return with that amount of uncertainty, watching your stock prices change every second, in any given second, there is only 0.02% above a coin-flip chance that the second you are looking at will be “successful.” Not so great odds.
Taleb states it another way:
Over one year we observe roughly 0.7 parts noise for every one part performance. Over one month, we observe roughly 2.32 parts noise for every one part performance. Over one hour, 30 parts noise for every one part performance, and over one second, 1,796 parts noise for every one part performance.4
So as we think back to news media, what should this tell us? The daily (hourly, second-by-second) feed of new information is not really getting us anywhere. Why? Taleb makes the case well:
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… 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 minuscule compared to the toxicity of all the garbage one has to go through to get to those jewels.5
Opportunity Cost. This is a concept that our choice to do one thing has a greater cost than what we might first imagine: the cost of the thing itself plus the cost of missing out on doing another option. If I choose to skip work today and drive to the beach, it’s clear that my cost is more than the gas to Charleston. The same principle applies here.
When we are so ingrained in the day-to-day (hour-by-hour, second-by-second) churn of social and news media, we may not miss out on anything, but how many of those things that we missed had actual significance in the long run? Not many.
Describing markets, Taleb draws a few conclusions:
1. Over a short time increment, one observe the viability of the portfolio, not the returns. In other words, one sees the variance, little else…6
He’s talking here about stock portfolios, but the same principle can be applied to news media. On a short time increment basis, most of what we “observe” is noise, not signal. He continues:
2. Our emotions are not designed to understand the point… If you think you can control your emotions, think that some people also believe they can control their heartbeat or hair growth. 7
We are not emotionally equipped to handle that type of volatility. I’m reminded of the old hymn “Come Thou Fount of Every Blessing.” In the fourth verse, Robert Robinson states:
Prone to wander, Lord, I feel it,
Prone to leave the God I love;8
Our hearts are prone to wander, to meander around and move from thing to thing.
So, where is this practical?
The next time you feel the impulse (as I frequently do) to open that Merrill Lynch or Coinbase app, refresh Instagram or Facebook, or check out the latest happenings on Fox News or MSNBC, perhaps take a beat.
Like a health club membership taken out to satisfy a New Year’s resolution, people often think that it will surely be the next batch of news that will really make a difference in their understanding of things.9
Take a beat and examine what you are after:
What’s your end game in how you consume media? It doesn’t have to be high and lofty, but can you define any intention other than boredom in the media that you use?
What effect on your emotional state does your media use have? Take stock of how your use of media leaves you feeling afterward.
What are you gaining and losing? We know that every use of media has a trade-off. For you to be using the daily media you use, you are losing something. What is it?
And on that note, see you next week!