Noise

I came across an article from my regular CFA Enterprise newsletter which eventually led me to Daniel Kahneman’s latest work called noise. In case you haven’t heard, Daniel Kahneman is the author of the popular book called ‘Thinking fast, thinking slow’ which I tried to read till the end but to no avail.

Anyway, I’m particularly hooked with his latest thinking on how human bias is worse than algorithm bias. According to him, whenever a decision requires human judgement, there will be a lot of noise. Noise is not the same as bias. He thinks people may have overused the word bias. Noise leads to inaccuracy whereas bias leads you to a corner of similar thinking/decisions/output. To put it simply, refer to the diagram below which was part of his HBR article. 

The concept is very much related to our daily lives be it personal and professionally. So I’m hoping to explore more on this later. Definitely can’t wait to get hold of the ‘noise’ book which Daniel is currently working on.