Protect Your Priors – Turn off the News

Watching the news is dangerous to your decision making. Protecting your “priors” is all about making sure you are working from a sound set of base data. Many people have a fear of flying.  Why?  Because an airplane crash makes for terrific news coverage.  It also makes for a great action movie. The more airplane crashes you watch the more frequent and likely you will believe them to be.

In the case of investing, buying or selling based on the news is generally a bad practice with a long term probability of loss akin to gambling. So what to do about it?  Do you have the strength to discern which news to trust and which to avoid?  How much of an effect will the news have on your experience of the past repeating itself?  Then there is the matter of interpreting the way everyone else will assess the situation.  Can you guess what the guessers are guessing?

For what it is worth, the value of the news is generally poorest when it is used for anything more the entertainment.  If your life depends on decision making then the news is perhaps of a negative sort, eroding the accuracy of your judgement. You are more informed, but of the wrong sort.

Instead, consider consuming more trust worthy sorts of information.  Read that which helps build proven mental models.  Learn what questions to ask of various data.  Is this data of normal distribution or of a sort of power law?  Then read the data.  Sound electrifying?  Perhaps not?  Then, avoid making a career of decision making (particularly if your compensation is directly tied to the decision’s effectiveness!)

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News is a sub-category of media.  Media is a hits based business.  They thrive on the power law.  The big hits cover the wasteland of mediocrity and ultimately drive traffic that the media owners can monetize. However, many consumers (dare, I say “most consumers?!”) perceive news as a normal distribution.  I would argue that this is a result of innate qualities of our natural learning mechanisms.  What have those around me experienced?  How likely am I to experience something similar?  This frame of thinking creates a regression to the mean.  Even if one assumes a breaking story is unusual, the tendency to adjust your experience back to the mean is absolutely instinctual.

Supposing you have absolute self-awareness, you may realize you are consuming somewhere on the top end of the power law and, having actualization of the matter at hand, then project downward the reality of the majority of the world.  That is to say, you could infer from the Black Swan news that the rest of the world is rather un-newsworthy. Good for you.  Now how will you use this knowledge?

You cannot decide the relative nature of daily life.  You also cannot infer the reaction of particular events.  All you really know is that you are more than 50% likely to have consumed something which was more popular than average simply by virtue of it’s wide broadcast.

If you have a strong inclination to math you may now begin to argue some Bayesian principles and LaPlace’s Law in such a way to calculate just that probability which you might die in a plane crash after having watched numerous news casts on the matter.  I will not fault that line of thinking.  However, what usefulness does it serve applied in such a manner?  Is it not better to avoid polluting your priors in the first place?  Start with a meaningful question.

What is my mental model?  What useful tidbit can I leave you with?

I have burned a path in my brain that warns me of watching the news.  Whenever I find myself getting sucked into some dicy story, I do one of two things.  I open up the long term memory of entertainment, consume and store it there.  Or, I start talking about statistics to help me avoid.  Which route do you suppose this election caused me to take?

I have also resolved to be a rather poor conversationalist at a dinner party as a result.

(inspired by the book)

Algorithms to Live By

by Brian Christian

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