Is the US becoming more of an empirically based society?

The early evidence across a variety of fields is in, and it appears to be yes — albeit rather slowly. I suspect this adaptation is going to accelerate rapidly over the next decade.

A blog post is not where we can do a full blown study on this — that’s what academia is for. However, we can take a closer look at areas where data analysis and experimental observation make a difference.

Empirical evidence (aka empirical data, knowledge, experimentation) is a source of knowledge acquired by means of observation or experimentation, producing voluminous reams of data. We can look at the results of these experiments and draw conclusions based on the weight of the evidence.

What follows is a brief, intentionally ironic anecdotal look at the areas where empiricism is on the rise:

Political forecasting: The big story of the 2012 elections was the rise of the data junkies, with Nate Silver being the most visible version. The squishy, narrative-driven data-free observations turned out to be little more than examples of confirmation bias -0- they simply failed.

Climate Change: A funny thing keeps happening to a number of climate denialists — they have given up their opposition and have accepted the scientific consensus. Some have simply admitted they are funded by Oil and Coal companies. The reason for this: The alternative narrative simply lacked sufficient data to respond to an overwhelming set of published papers and data.

Technology User Design: As Wired explained last year, some businesses guess how new products or services are going to be received by consumers. (Think “New Coke”). But web companies have the ability to quantify this process, and actually test users who are unknowingly moved to novel pages to test their reactions. This A/B testing has revolutionized a number of industries, including web interface design, online checkout carts, and even political fundraising.

Economics and public policy: In their book This Time is Different, Reinhart & Rogoff looked a centuries of data about credit and other financial crises. To prod policy makers into becoming more data driven, they have made all of their statistical data available for download. This stands in stark contrast to the gut feel approach we have seen be deployed so disastrously over recent decades.

Asset Management: Finance has thrown an enormous amount of analytical firepower at the field of putting capital to work. From Quant analytics to Venture Capital to simple investing, there has never been more statistical analyses of what does and doesn’t works  than there is today. The old myths, heuristics and misleading assumptions are slowly falling away as we learn precisely what not to do.

The biggest factor impacting investors is no longer our knowledge base, but rather our behavioral elements .

~~~

Perhaps a worthwhile question we should ask ourselves: What narratives am I telling myself today? Is there any data set or analyses that can prevent me from fooling myself?

Empiricism will be moving more and more of the US economy forward. Will you profit from this, or will your loss be someone else’s gains?

 

 

Previously:
Agnotology  (January 21st, 2009)

The Dangers of Non-Modeled Narrative Story Tellers (December 3rd, 2012)

Reality Check: What Are You Lying to Yourself About? (January 7th, 2013)

Category: Data Analysis, Psychology, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

24 Responses to “Rise of the Empiricists”

  1. Nick @ PFD says:

    I’d really like to believe we’re moving toward empiricism, but most people’s brains just aren’t wired that way. That said, success tends to persuade, and as you pointed out the geeks have had some notable triumphs. Things are certainly better than they were a decade ago.

    Of course, even if one accepts the premises of data-driven decision-making, making that principle work in a large company is another matter entirely…

  2. Nick points to it..

    as does.. The Dangers of Non-Modeled Narrative Story Tellers (December 3rd, 2012) (link above)

    “Empiricism” is akin to an Instrument..if so, we, still, need the *right person ‘grinding the Axe’(1), or, we get, rather, yet, another with ‘an Axe to Grind’(2)..

    (1) http://www.spin.com/articles/spins-100-greatest-guitarists-all-time?page=16

    (2)”…The story is a cautionary fable concerning the author’s recounting of an incident from his youth, where a passing stranger takes advantage of him and, by flattering him, dupes him into turning a grindstone to sharpen the stranger’s axe. Miner then uses having an axe to grind as a metaphor for having an ulterior motive:…”
    http://www.phrases.org.uk/meanings/174000.html

  3. DSS10 says:

    And there will be a move towards the manipulation of empirical analysis. I’m old enough to remember the faulty statistics and analysis that rationalized supply side economics and the Laffer curve. I think we will see a rise in the Lawrence Yun school of Empirical analysis…

  4. danm says:

    Empiricism is still in its infancy.

    It’s nice to know we can better analyze the past but the reality is we still can’t use past numbers properly. And to predict the future, even worse.

    Currently, the use of empiricism increases our level of arrogance and hubris.

    I hate how the net will bombard me with adds of stuff I have already purchased or control my searches to what it thinks I need to find.

    I hate how historical delinquency data showed no risks in real estate and convinced everyone prices could go to the moon.

    This will sound odd but empirism is still an art at this point in time. And when we finally get it right, we will be God. We will have “the” formula that permits us to see the past, present and future. We will have hit the singularity.

    Will life be worth living at that point?

  5. Non Sequor says:

    Confirmation bias may overwhelm empiricism.

    There’s a fundamental difference between laboratory sciences, where if you need more data to prove a relationship between two variables you can just repeat the experiment, and observational sciences, where in order to collect more data you have to wait for it to happen.

    The basic problem is that you can only find relationships between variables that you’re looking for, and as the amount of data available for analysis increases, the chance that you will find it even if it isn’t there goes up. Worse still, I don’t think the amount of time it takes to figure out that you’re wrong, if you’re open to that, decreases by that much due to having more data collection.

    Deeper still, there are some genuinely subjective issues at play which just come down to how people feel and what they want. Sometimes on these issues, there is a tendency to not address them as what they are, feelings, and instead try to put a quantitative veneer over them. “Here’s a stack of studies that say that my feelings are more correct than yours so we should just go ahead with my plan and you’re a moron for disagreeing with me.”

  6. capitalistic says:

    Too much data and not enough interpretation. Paralysis by over-analysis. With all the data we swim in, most investors don’t beat the market. Why? Everyone is doing the same thing!

    ~~~

    BR: I have argued most people have misinterpreted the data (including your use of the cliche “Paralysis by over-analysis”). See:

    Investors’ 10 most common mistakes

    Keep it simple, avoid the pitfalls

  7. Conan says:

    We have a barbell type of symmetry today:

    1) The empirical approach – of big data… this can be used for both honerable / scientific reasons or as a weapon to manipulate for other reasons.

    2) Emotional approach or Mind numbing junk – reality TV, sensationalistic journalism, political pundits, economists, most investment “advice” as seen on TV, extreme fundamentalism, etc.

    So as an individual we should use and listen to the #1 point to the positive side, but remember that figures don’t lie, but lairs can figure. So be wary!

    As far as point #2 is concerned Barry has written many good articles about tuning out and eliminating noise. However the vast masses of folks will unfortunately be tuned in. We just have to try not to be one of them!

  8. farmera1 says:

    Ah, The Age of Enlighment. Great age of reason and scientific thought over superstition and tradition and dogma. In my part of the world, the rural Midwest not a chance. The earth is 6,000 years old, Fox News is the only source of the great and cosmic truth (along with the Bible when convenient), Global Climate Change is a Gore plot and all government is bad. But the rural areas will be the last to see change, always has been and always will be.

    “The Age of Enlightenment (or simply the Enlightenment or Age of Reason) was a cultural movement of intellectuals in the 17th and 18th centuries, first in Europe and later in the American colonies. Its purpose was to reform society using reason, challenge ideas grounded in tradition and faith, and advance knowledge through the scientific method. It promoted science, skepticism and intellectual interchange and opposed superstition,[1] intolerance and some abuses by church and state.”

  9. techy says:

    70% of population is incapable of discerning fact from obvious bullshit when it come time to vote. Wait till 2014/2016 when you will see more power to bible thumping supply siders elected by the rubes who are toiling their life away waiting for the trickle down.

  10. Mike in Nola says:

    More of what techy say:

    no mention of the destruction of our public educational system. The right wingers are hard at it, assisted by the rentiers who hope to make a nice profit off the privatized schools. Many millions are being distributed in school vouchers are finding their way into creationism-teaching schools to educate more little Republicans about how the world was created, why guns are good, and how climate change is a liberal plot.

  11. wally says:

    One of those things is not like the others.
    “Asset Management” is a game where the ground rules change based on what the players do; it’s a moving target and what worked once my not work now. This is especially true now that information is spread so quickly; that decreases the cycle time for trying to shortcut the other guys.

  12. streeteye says:

    Gates Foundation trying to figure out empirically best teacher evals
    http://www.bizjournals.com/seattle/news/2013/01/08/gates-foundation-study-seeks-best.html

    Empirically, economists lie more
    http://danariely.com/2013/01/26/economics-and-the-maximization-of-profit-and-lies/

    “Reality is nothing more than a collective hunch” – Lily Tomlin

  13. BenGraham says:

    I raise you ten contraries for every point you cite. NonSequitor has it right, the confirmation bias will overwhelm any progress towards using data. Couple that with the urge to outright fabricate and cherry pick data and it is a lost cause. The old adage, “there are 3 types of lies: lies, damned lies and statistics” comes to mind (my apologies to the author of that phrase, I’m sure I mangled it). Just look how Jon Stewart pointed out that Fox made a big deal of Clinton denying responsibility when the clip actually showed (uncut) the very next sentence fragment accepted responsibility. There seems to be pride in misleading with “evidence”. Human frailty does not wane in a few short years. Take the gun nuts for example. Next they’ll “need” rockets to defend against drones despite all the evidence correlating weapons with violence. Take every debate about taxes- all the data you could drown in and yet you must search hard to find it presented factually and fairly. You’re too optimistic today, BR.

  14. Greg0658 says:

    Yes – Paper Matters – both types > white & green (yellow & red)

    since I signed in for a thread few back .. tomorrow is 80th anniversary of hitler being sworn in .. that battle ended well (pov) .. the war goes on – doesn’t it.

  15. RW says:

    A comment I heard Larry Summers make recently is that he tries to check his assumptions by revisiting old decisions, not simply to judge them as right or wrong — anyone who makes decisions is going to get some wrong — but to ask if he could have made a better decision given what was known then (not what is known in hindsight).

    Analysis paralysis is a known problem with large data sets so developing rules and algorithms is critical and it is there that bias will creep in. One counterweight is to develop an approach similar to the approach in science recommended by Imre Lakatos, a sophisticated falsificationism. It is always possible to dredge up an “ocean of counter-examples” when arguing about a prediction but a questioned or even arguably failed prediction does not make or break a theory, what matters is how well a series of predictions holds up and how well new data is anticipated; e.g., a sign of a failing theory or conceptual framework is one where predictions (hypotheses) increasingly serve to explain away contradictory data rather than anticipate and/or explain new data or novel findings.

    PS: The question of whether climate change is “bad” or “good” is the wrong question, a red herring and a non sequitur: Climate change is happening and within mere decades will be unstoppably on its way to a 4-6 degree Celsius global mean increase. Asking the correct question begins with the observation that humanity is mostly living in the wrong place and/or is completely unprepared for the consequences of that change. What will the human response be? That will be answered within the next 50 years but I suspect most will either die, attempt to migrate and/or go to war to get what they no longer have: land, food, water, comfort, the prospect of old age.

  16. ToNYC says:

    We are ALL born into Agenda and control by Narrative, the 90% will accept the easy way of not rocking the boat and rearranging the available habits like a rock-filled pillow waiting for the next bedtime story that allows them safely to sleep. Thinking is hard work and confrontation, takes freedom and independence from the current paradigm and other hookers. Beyond that, Faith is the polar opposite of Science, where science begs to be proven wrong by the next experiment, faith dogma demands the last data construction is best. Empiricism rises like the obelisk in Stanley Kubrick’s prophetic epic “2001: A Space Odyssey” (1968)
    amid the ape working the big bones.

  17. rd says:

    Just because the data is now available and some people are analyzing, doesn’t mean that people are using it.

    Congress is Exhibit 1.

  18. hue says:

    “the picture’s pretty bleak gentlemen, … the world’s climates are changing, the ____ are taking over. we all have a brain the size of a walnut” http://bit.ly/WMzKG5

  19. [...] Are Americans becoming more empirical?  (Big Picture) [...]

  20. icm63 says:

    1) A Climate scientist studies the last 200 years of carbon trends. The earth has been around for a many million years. So wouldnt you think a study sample of 100,000 years would be required at the very least. The only profession that can do that is : Geologist. And they say the climate change is just WEATHER !
    2) If a industry or company or individiual is dirty FINE them, dont tax the consumer.
    3) When the earth heats up (ie carbon included) the earth atmosphere releases the hot GAS into SPACE, the earth is a natural organisim just like a plant or insect or animal. Its mother nature working.

    BUT LETS BE TIDY with our planet. FINE them DONT TAX everyone.

  21. jjsocrates says:

    Want a good laugh? Check out the comments sections on Barry’s past blog posts about Nate Silver. If empiricism is on the rise, it certainly wasn’t back in September in conservative circles.

    Heck, you’d think the fiscally conservative crowd would be better at math. (But maybe not…$1T in debt, and their solution to the crisis is to cut funding to the Department of Education, PBS and Planned Parenthood.)

  22. jjsocrates says:

    Empirical data will always lose to a good story. Unfortunately, too many people are too lazy to look at the data, and just want someone to tell them what it means. And unfortunately, too often, the people telling them what it means may either 1) have a different agenda that what the data is saying 2) interpret the data in a way contrary to what the data says.

    I also agree that the Confirmation Bias will play a huge part there and that 3) people will simply ignore any data that contradicts a prior belief.

  23. lee aaron says:

    danm – excellent post. Except Empiricism can never make humans or artificial intel into God. What we will be presented with at that point would be the Matrix. Every so often there would be a Neo who would shake the foundations of the modeling and would therefore be a threat to society. Life would still be worth living just for that hope. Of course since the world is finite and life’s paradigms change (eventually) empiricism would fail. This is due to the philosophical truism that reality is based only on perception. Sardonically, one could also say this has been done before with the coming of the Son of God, which also happens to parallel the Matrix movies. Empiricism sucks except for marketing firms and political consultants. Everyone else should get a job.

  24. graphrix says:

    As an older student who returned to the UC system to get a degree in economics (don’t worry Barry, I see what you saw and any time EMH gets brought up I question it with authority, and explain why I was short LEH back when you were too), and I can assure you that the top younger students (my roommate for example) is totally empirically driven. We want the data! We want to know how human behavior effects the data, and how micro effects the macro. A great younger data/quantitative driven professor had this to say when I questioned EMH, “every individual acting in their own rational behavior, but in the aggregate you can’t measure who is rational”. I beg to differ a little bit, but progress has been made.

    BTW, I got an A in the stock market class, despite the required text…. Jeremy Siegel’s “Stocks for the Long Run”. The best part of that class is the mock stock portfolio we had to pick back in April/May. Mine is up 50%, and the TA questioned my pick of PHM over LEN (disclosure: I do own shares of PHM). Timing and the sectors matter. Buy and hold is for chumps, and someone (maybe me or my roommate) will be able to empirically figure that out. Or we can just cite you constantly.