Often, it can seem as if we feel compelled to make the predictions we make (either in economics or in our daily lives). Even when we have little to no information, or when that information is shaky, we predict. In The Signal and the Noise, Nate Silver highlights the evolutionary motivations behind our incessant need to make predictions:
Human beings do not have very many natural defenses. We are not all that fast, and we are not all that strong. We do not have claws or fangs or body armor. We cannot spit venom. We cannot camouflage ourselves. And we cannot fly. Instead, we survive by means of our wits. Our minds are quick. We are wired to detect patterns and respond to opportunities and threats without much hesitation.
‘This need of finding patterns, humans have this more than other animals,’ I was told by Tomaso Poggio, an MIT neuroscientist who studies how our brains process information. ‘Recognizing objects in difficult situations means generalizing. A newborn baby can recognize the basic pattern of a face. It has been learned by evolution, not by the individual.
The problem, Poggio says, is that these evolutionary instincts sometimes lead us to see patterns where there are none there. ‘People have been doing that all the time,’ Poggio said. ‘Finding patterns in random noise.’
It is natural to attempt to detect patterns in the universe – it is a survival mechanism. But, as the universe and its information systems have grown more complex, often those predictions are inaccurate:
Alvin Toffler, writing in the book Future Shock in 1970, predicted some of the consequences of what he called ‘information overload.’ He thought our defense mechanism would be to simplify the world in ways that confirmed our biases, even as the world itself was growing more diverse and more complex.
Our biological instincts are not always very well adapted to the information-rich modern world. Unless we work actively to become aware of the biases we introduce, the returns to additional information may be minimal – or diminishing.