Noise versus signal or noise and signal? These are two very important and distinct concepts that are highly relevant to the true warrior. Noise is just that: chatter, distraction, volume, static, unimportant filler. It is found everywhere, day in and day out, in each and every life, circumstance, or situation. Signal on the other hand is what it’s all about: the message, the communique, the golden nugget of information or data. It’s like when you’re driving down the highway and seeing a forest of signs and billboards. The signal is the exit marker you’re struggling to identify. The noise is everything else. Think of it this way: if it isn’t signal, it is noise!
How does one separate the signal (important and relevant) from the noise (meaningless drivel)? That is your challenge. Some things make it easier and some things make it harder. Take the stock market for example. A day trader is faced with tons of data and it is almost impossible to segregate the signals from the noise. They are indistinguishable. Data is data; words are words; decisions are decisions; actions are actions. Which is the signal and which is the noise? They are not tagged and indexed for you. Only time and statistical significance can distinguish the wheat from the chaff in this case.
Therefore it is very difficult to make good decisions. On the other hand, if you review your portfolio quarterly, semiannually, or annually, the signal is obvious and it is easy to decide how to re-balance it. Trim the losers and add more winners! Value investors win, and day traders lose.
Can you see how a knee-jerk reaction to a single event may not be appropriate? This is why systems, check lists, process, and structure are so useful in helping to make decisions. These techniques allow the signal to be more readily identified and that is the goal: to receive, read, and understand the signals! This is why a thirty-day moving average is more relevant than a daily snapshot; this is why graphing and statistical analysis is so useful. It makes it easier to see a signal. When properly done, it helps you understand the difference between causation1 (extremely relevant signal) and correlation2 (interesting but highly irrelevant noise).
You are warriors and by learning to find and interpret the signal, you will achieve the desired turnaround and create massive success. So it has been written.