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Gradually Getting Closer to the Truth

You can use a big idea without a physics-like need for exact precision. The key to remember is moving closer to reality by updating.

Consider this excerpt from Philip Tetlock and Dan Gardner in Superforecasting

The superforecasters are a numerate bunch: many know about Bayes’ theorem and could deploy it if they felt it was worth the trouble. But they rarely crunch the numbers so explicitly. What matters far more to the superforecasters than Bayes’ theorem is Bayes’ core insight of gradually getting closer to the truth by constantly updating in proportion to the weight of the evidence.

So they know the numbers. This numerate filter is the second of Garrett Hardin‘s three filters we need to think about problems.

Hardin writes:

The numerate temperament is one that habitually looks for approximate dimensions, ratios, proportions, and rates of change in trying to grasp what is going on in the world.

[…]

Just as “literacy” is used here to mean more than merely reading and writing, so also will “numeracy” be used to mean more than measuring and counting. Examination of the origins of the sciences shows that many major discoveries were made with very little measuring and counting. The attitude science requires of its practitioners is respect, bordering on reverence, for ration, proportions, and rates of change.

Rough and ready back-of-the-envelope calculations are often sufficient to reveal the outline of a new and important scientific discovery … In truth, the essence of many of the major insights of science can be grasped with no more than child’s ability to measure, count, and calculate.

 

We can find another example in investing. Charlie Munger, commenting at the 1996 Berkshire Hathaway Annual Meeting, said: “Warren often talks about these discounted cash flows, but I’ve never seen him do one. If it isn’t perfectly obvious that it’s going to work out well if you do the calculation, then he tends to go on to the next idea.” Buffett retorted: “It’s true. If (the value of a company) doesn’t just scream out at you, it’s too close.”

Precision is easy to teach but it’s missing the point.