In this post, we’ll unpack all you need to know about noise versus signal, defining exactly what they are, the differences between them, why signal is key to success, how to leverage it and more.
What Is Noise?
Noise refers to irrelevant information that can decrease clarity and the ability to make informed decisions.
What Is Signal?
Signal refers to relevant information that can increase clarity and the ability to make informed decisions.
The Differences Between Noise & Signal
Noise is meaningless information that creates confusion. Signal is meaningful information that creates clarity.
Noise is distracting. Signal is focused. Noise is undesirable. Signal is desirable.
Noise is low quality and leads to inaccurate, uninformed decisions. Signal is high quality and leads to accurate, informed decisions.
An example of noise is random market fluctuations. An example of signal is consistent market trends.
Noise Versus Signal Table Summary
| Noise | Signal |
|---|---|
| Irrelevant Information | Relevant Information |
| Meaningless Information | Meaningful Information |
| Creates Confusion | Creates Clarity |
| Distracting | Focused |
| Undesirable | Desirable |
| Low Quality | High Quality |
| Inaccurate | Accurate |
| Uninformed | Informed |
Over Fitting Versus Underfitting Versus Well Fitted
Underfitting occurs when a model is too simple by capturing too little signal.
Overfitting occurs when a model is too complex by capturing too much noise.
A well-fitted model accurately captures signal (relevant information) while ignoring noise (irrelevant information).
Why Signal Is The Key To Success
Success is determined by your ability to identify signal and ignore noise.
When you filter out noise and focus on signal, you ensure that you are attentive to the most important information. This allows you to make more effective decisions and achieve more effective outcomes.
How To Leverage Signal
The key to leveraging signal is by developing strategies that allow you to minimise noise and maximise signal.
The faster you are able to filter out noise and identify signal, the faster you’ll be able to process information and make decisions and ultimately the faster you’ll be able to achieve your desired goals.
Summary (TL;DR)
Noise is irrelevant information that decreases clarity. Signal is relevant information that increases clarity.
Signal is the key to success as it ensures that you are attentive to the most important information, thus allow you to make more effective decisions and achieve more effective outcomes.
The key to leveraging signal is to develop strategies that allow you to minimise noise and maximise signal. The faster you are able to filter out noise and identify signal, the faster you’ll be able to process information and make decisions and ultimately the faster you’ll be able to achieve your desired goals.
