Monday, September 10, 2012

Nate Silver's new book

Nate Silver has a new book that examines the state of predictive modeling in the age of big data. Here's an excerpt. If you need more recommendation than that, you haven't been paying attention.

These meteorologists are dealing with a small fraction of the 2.5 quintillion bytes of information that, I.B.M. estimates, we generate each day. That’s the equivalent of the entire printed collection of the Library of Congress about three times per second. Google now accesses more than 20 billion Web pages a day; the processing speed of an iPad rivals that of last generation’s most powerful supercomputers. All that information ought to help us plan our lives and profitably predict the world’s course. In 2008, Chris Anderson, the editor of Wired magazine, wrote optimistically of the era of Big Data. So voluminous were our databases and so powerful were our computers, he claimed, that there was no longer much need for theory, or even the scientific method. At the time, it was hard to disagree.

But if prediction is the truest way to put our information to the test, we have not scored well. In November 2007, economists in the Survey of Professional Forecasters — examining some 45,000 economic-data series — foresaw less than a 1-in-500 chance of an economic meltdown as severe as the one that would begin one month later. Attempts to predict earthquakes have continued to envisage disasters that never happened and failed to prepare us for those, like the 2011 disaster in Japan, that did.

The one area in which our predictions are making extraordinary progress, however, is perhaps the most unlikely field. Jim Hoke, a director with 32 years experience at the National Weather Service, has heard all the jokes about weather forecasting, like Larry David’s jab on “Curb Your Enthusiasm” that weathermen merely forecast rain to keep everyone else off the golf course. And to be sure, these slick-haired and/or short-skirted local weather forecasters are sometimes wrong. A study of TV meteorologists in Kansas City found that when they said there was a 100 percent chance of rain, it failed to rain at all one-third of the time.

But watching the local news is not the best way to assess the growing accuracy of forecasting (more on this later). It’s better to take the long view. In 1972, the service’s high-temperature forecast missed by an average of six degrees when made three days in advance. Now it’s down to three degrees. More stunning, in 1940, the chance of an American being killed by lightning was about 1 in 400,000. Today it’s 1 in 11 million. This is partly because of changes in living patterns (more of our work is done indoors), but it’s also because better weather forecasts have helped us prepare.

Perhaps the most impressive gains have been in hurricane forecasting. Just 25 years ago, when the National Hurricane Center tried to predict where a hurricane would hit three days in advance of landfall, it missed by an average of 350 miles. If Hurricane Isaac , which made its unpredictable path through the Gulf of Mexico last month, had occurred in the late 1980s, the center might have projected landfall anywhere from Houston to Tallahassee, canceling untold thousands of business deals, flights and picnics in between — and damaging its reputation when the hurricane zeroed in hundreds of miles away. Now the average miss is only about 100 miles.

Why are weather forecasters succeeding when other predictors fail? It’s because long ago they came to accept the imperfections in their knowledge. That helped them understand that even the most sophisticated computers, combing through seemingly limitless data, are painfully ill equipped to predict something as dynamic as weather all by themselves. So as fields like economics began relying more on Big Data, meteorologists recognized that data on its own isn’t enough.

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