[Book Sip] The Ability to Detect Lies: 'Superfact'

Some sentences encapsulate the entire content of the book itself, while others instantly reach the reader's heart, creating a connection with the book. We introduce such meaningful sentences excerpted from the book. - Editor's note

This book, written by an economist, reveals the fact-checking methods he usually uses as a 'data detective.' The core concept of the book, the ‘Super Fact,’ refers to the ability to instantly discern truth and falsehood in information. To possess a ‘Super Fact,’ one must understand the message conveyed by numbers and control emotions. Here, ‘numbers’ refer to statistics and charts that concretely express the state of the world. ‘Emotions’ refer to anger, joy, and passion we feel when we obtain important information. The author points out that the more extreme the emotional reaction to information, the more reason is paralyzed and fact-checking is avoided. He then provides cases, analyses, and advice.

Survivorship bias distorts even some research results on investment performance. These studies first examine “funds currently in existence.” Therefore, they do not properly reflect or consider the fact that all funds that have existed so far are survivors. This leads to survivorship bias.

Burton Malkiel, an economist and author of A Random Walk Down Wall Street, estimated how much survivorship bias inflates the performance of surviving funds. The overestimation Burton presented was as much as 1.5 percent annually. Only 1.5 percent may not seem significant, but when investing over a lifetime, the accumulated effect doubles, reaching 100 percent.

Super Fact Rule 5_Do not be deceived by luck and chance

However, ‘N=total’ is often closer to a ‘comforting assumption’ than a fact. As mentioned earlier, administrative data often contains information about the person who fills out the form and pays the costs in each household. Therefore, it is difficult to capture people who are far from administration. Also, it is easy to forget that ‘N=total’ is not the same as ‘N=all people subscribed to a specific service.’ For example, Netflix has rich data on all its customers. However, it has much less data on non-customers. Generalizing one group’s data to another group would be very risky for Netflix.

Super Fact Rule 6_Track the deleted people and intentions

Super Fact | Written by Tim Harford | Translated by Kim Taehoon | Sejong Books | 476 pages | 21,000 KRW