Nassim Taleb: We should retire the notion of standard deviation • Hacker News Board

Re: Nassim Taleb: We should retire the notion of standard deviation

#201

Post by lhnz » Thu, Jan 16, 2014, 1:32 AM UTC

bluecalm wrote: post #106

bnegreve wrote: post #88

Earlier quoted context omitted.

> The guy is a vile idiot of the worst kind: ignorant and aggressive. Your comment is a bit irritating. I don't know the author of this blog post but I think he has a couple of valid points. You seem to dislike him for some other reasons. Feel free to share them. The blog post is still perfectly reasonable. Anyway, I agree some of your comments as well, namely this: > I can give hundreds when std dev is useful and me…

>Your comment is a bit irritating. I don't know the author of this blog post but I think he has a couple of valid points. You seem to dislike him for some other reasons. Feel free to share them. The blog post is still perfectly reasonable. Really ? You think call for substituting one of the most common use measures in science, finance, gambling etc. with some other measure which doesn't have the same crucial properti…

So your argument is that if large groups of scientists are misunderstanding and misusing a scientific tool nobody should try to assert or argue that this is happening without providing exceptional proof since otherwise it might insult their credibility?

Alright...

Re: Nassim Taleb: We should retire the notion of standard deviation

#202

Post by kaa2102 » Thu, Jan 16, 2014, 1:38 AM UTC

corresation wrote: post #163

kaa2102 wrote: post #119

Earlier quoted context omitted.

I think that you may be missing the point of Fooled by Randomness. The point is knowing whether your success came from luck, skill, or both. It also shined a light on people who took high-probability, "sure bets" (selling out-of-the-money options) that paid off most of the time but would eventually bankrupt them if the stock price jumped.

Quite contrary, the point of the book is that it is very difficult to differentiate between skill and luck when random odds influence events. For instance if you asked 1000 people to guess coin flips, on average one half will be wrong on each flip. So on the first flip you'd drop to 500, then 250, then 125, then 65, then 32, then 16, then 8, then 4, then 2, then you'd -- in a perfectly ideal scenario -- have one pers…

The key question is how you determine the difference between skill and luck. Is that difference statistically significant and is their a different set of inputs that lead to this output?

For instance, Taleb's example of fund managers that beat the market for five years in a row. You start with a cohort of 10,000 and a 50% chance of beating the market each year. There will be a group of 300 or so fund managers that consistently beat the market 5 years in a row. This does not differentiate the lucky from the skillful. 1) Analyzing other cohorts that had higher success rates and 2) their investment strategies and decisions would be necessary to make the determination.

Well, a broken clock is right twice a day. Someone who always calls for a market correction will eventually be right. The real question is how will the investment strategy fair over decades or longer.

We may have different takeaways from the book. My takeaway was that one should invest in becoming skilled (learn strategies that work in the long run) rather than seeking or worshiping those who may just be lucky.

Re: Nassim Taleb: We should retire the notion of standard deviation

#203

Post by lhnz » Thu, Jan 16, 2014, 1:45 AM UTC

avenger123 wrote: post #169

edw519 wrote: post #102

Earlier quoted context omitted.

Counterexample: | .. | . . | waste | . . | stuff | of | . . | I | my | . . | don't | time | . stuff I'll . | grok | | . read . | |(Nassim Taleb) | | . | . | | . |______________________________________________________ -3 -2 -1 0 1 2 3 standard deviations

Very nice! I did have his books on my reading list. But this whole discussion definitely puts me closer to the "waste of my time" side of the distribution.

That would be a mistake.

He's getting a lot of hate because he's insulted a lot of people while stretching some of his arguments and opinions too far, but his ideas are still better intellectual reading than most of what's available elsewhere.

If you care to read the comments again, you'll notice many of the disagreements with him are on the level of knee-jerk emotional reactions and not well reasoned criticism.

However, it's true that he's turned/turning into some gigantic obnoxious ego whose ideas are beginning to look like wild gambles (speaking more often than he substantiates.) He's definitely intelligent and I would say a genius, but in each book it's like: 10% great ideas, 30% very interesting intuitions, 30% vitriolic anger at people/institutions/ideas, 30% broken ideas/intuitions. But all is sold as the truth (tm).

If you wish to increase the quality of what you read you could use Taleb's own heuristic: when a book has existed for a thousand years it will exist for a thousand more. Time is a great arbiter for importance.

My point is that you either hazard a guess on which of his ideas are powerful, or you wait until the dust settles and somebody else has done this work for you.

Re: Nassim Taleb: We should retire the notion of standard deviation

#204

Post by Fomite » Thu, Jan 16, 2014, 1:49 AM UTC

jessaustin wrote: post #190

Fomite wrote: post #115

Earlier quoted context omitted.

Among other things, I've seen way more appalling applications of statistics in finance and economics than I have in social science. Also, the assertion in your post that the misapplication of statistical models in social science is "disastrous" but somehow giving finance a pass? You've got to be kidding me.

NNT, at least, doesn't give finance a pass. He excoriates them at every opportunity.

That's why I was so puzzled - NNT rather eagerly takes finance to task.

Re: Nassim Taleb: We should retire the notion of standard deviation

#205

Post by eruditely » Thu, Jan 16, 2014, 1:50 AM UTC

avenger123 wrote: post #169

edw519 wrote: post #102

Earlier quoted context omitted.

Counterexample: | .. | . . | waste | . . | stuff | of | . . | I | my | . . | don't | time | . stuff I'll . | grok | | . read . | |(Nassim Taleb) | | . | . | | . |______________________________________________________ -3 -2 -1 0 1 2 3 standard deviations

Very nice! I did have his books on my reading list. But this whole discussion definitely puts me closer to the "waste of my time" side of the distribution.

Sigh. If you read his books or papers or see a lecture or the technical companions, you will see that the case against him is vastly overstated. It's like how social justice people probably view PG right now. He is pretty reasonable and I love seeing him accused of all sorts of things here when it's obviously vastly overstated. He lives for trolling the try-hard crew found here. Do you seriously think he is advocating the absolute abolition of std deviation inquisition style?

Re: Nassim Taleb: We should retire the notion of standard deviation

#206

Post by photojosh » Thu, Jan 16, 2014, 1:52 AM UTC

thaumasiotes wrote: post #200

azakai wrote: post #78

Earlier quoted context omitted.

>> The notion of standard deviation has confused hordes of scientists > What an assertion! It also proved to be very useful for hordes of scientists... what about some examples of confused scientists ? He is exaggerating, for sure. But the point is valid: the mean average deviation (MAD) is often very different than the standard deviation (STD), and the MAD is more intuitive, it has a natural geometrical interpretati…

> The STD is far more easy to analyze in a mathematical way. That is the huge value it brings This is also what I have read (I have essentially no experience with statistics). > squaring is an operation you can take the derivative of, but absolute value you cannot We can talk without wild, obviously false hyperbole. It's trivial to take the derivative of the absolute value function. Working with it is more difficult,…

That little discontinuity at the origin is kind of a pain though.

Re: Nassim Taleb: We should retire the notion of standard deviation

#207

Post by eruditely » Thu, Jan 16, 2014, 1:54 AM UTC

mekael wrote: post #96

dxbydt wrote: post #90

The notion of area has confused hordes of scientists; it is time to retire it from common use and replace it with the more effective one of circumference. Area should be left to mathematicians, topologists and developers selling real estate. There is no scientific reason to use it in statistical investigations in the age of the computer, as it does more harm than good. Say someone just asked you to measure the area o…

Possibly the best thing I've read all week. Thank you sir.

Except the difference here is that generally Taleb is right and has a point. You know the b difference between the probabilistic hacker news titles generator and the actual titles found here are that even though they sound the same and have like weight same style. .. one is actually real.

Re: Nassim Taleb: We should retire the notion of standard deviation

#208

Post by photojosh » Thu, Jan 16, 2014, 1:57 AM UTC

azakai wrote: post #140

Daniel_Newby wrote: post #126

Earlier quoted context omitted.

> MAD, however is nicer for reporting data since it is more intuitive. I have a hard time fathoming how anyone could think such a thing. This is math: we should be using things because they map to reality in some way, not because they are aesthetically pleasing. The standard deviation maps to processes where the "importance" of changes is proportional to their square. For example, electrical power is proportional to…

> The standard deviation maps to processes where the "importance" of changes is proportional to their square. Sure, but the point of the article is that STD is used very commonly, in places where that does not make sense. For example, it is common to see things like "the weight of the test subjects was 170cm (STD 5cm)".

Indeed, why does it not make sense? I read that, I immediately know that about 68% will be between 165 and 170 cm. http://en.wikipedia.org/wiki/68–95–99.7_rule

Re: Nassim Taleb: We should retire the notion of standard deviation

#209

Post by Daniel_Newby » Thu, Jan 16, 2014, 2:01 AM UTC

klodolph wrote: post #189

azakai wrote: post #140

Earlier quoted context omitted.

> The standard deviation maps to processes where the "importance" of changes is proportional to their square. Sure, but the point of the article is that STD is used very commonly, in places where that does not make sense. For example, it is common to see things like "the weight of the test subjects was 170cm (STD 5cm)".

Why does this not make sense? Please explain. Because of the central limit theorem, many distributions encountered in science are approximately Gaussian, which is parameterized by its mean and standard deviation. According to Wikipedia: "Height is sexually dimorphic and statistically it is more or less normally distributed, but with heavy tails." On top of that, we have well-understood and easy to compute estimators…

It makes no sense in that it has no physical meaning. As you say, even without deeper meaning it is a fine tool for handling Gaussian distributions.

Re: Nassim Taleb: We should retire the notion of standard deviation

#210

Post by kylebrown » Thu, Jan 16, 2014, 2:08 AM UTC

bayesianhorse wrote: post #179

Nassim Taleb somehow likes to beat up on normals... We Bayesians have similar notions, but we usually try not to overly bully frequentist methods, the poor things. Also, being familiar with Bayesian methods, a lot of what Taleb is saying sounds vaguely familiar...

Well, frequentist methods are taking the blame for the most recent financial crisis, such as assuming a normal distribution when the empirical one is fat-tailed.

Perhaps the Bayesian methods will take the blame in the next financial crisis. Such as the error in estimating a non-stationary distribution and quantifying the uncertainty.