#6: Predicting How Events will Unfold

MAKE PREDICTIONS GREAT AGAIN!

It’s 2.30am on the 9th of November 2016. Hilary Clinton has just hung up the phone after conceding defeat in the US election. In a massive shock, Donald Trump is now heading to the White House. Throughout 2016, Trump had consistently been behind in the polls with all major media outlets. 

On election day, The New York Times gave him just a 15% chance of winning. The betting markets, with 100s of millions traded had Trump’s odds at effectively a 1 in 6 roll of a dice chance. Just as with the Brexit vote earlier in the year, the majority had got the outcome massively wrong. How did this happen and why are predictions so crucial to us?

As humans, we are prediction machines - every decision we make is built on them; from how we spend our time, where we invest money or who we enter a long-term relationship with. Given their importance, improving our predictions should therefore help us greatly. Take the inevitable rise of A.I. for example; by predicting which career paths or business models are likely to be disrupted, we can position ourselves accordingly.

In ‘Super forecasting’ Philip Tetlock and Dan Gardner, wrote about the best predictors in the world. They ran a government backed forecasting tournament in the mid-2010s with 10,000s of ordinary people, who gave predictions on real-world events such as elections, environmental disasters and war outbreaks. A few everyday people were named ‘superforecasters’ able to beat even professional experts in American intelligence.

What kind of people succeeded? The best predictors were the best belief updaters. They were able to admit when they were wrong, as new information emerged. They were generalists, who cross referenced examples from different domains, they thought probabilistically and were able to see the problem from many perspectives. The wisdom of crowds also rang true; teams performed better.

And why did the polls get it so wrong in 2016? Nate Silver, author of ‘The Signal and the Noise’ and editor of 538.com the go-to statistical site for US elections, suggests a couple of ideas. Firstly, polling is correlated – if you make a forecasting error in one state, this is likely replicated over multiple states – statistical models struggle with this. 

Secondly, the mainstream media and pollsters were biased and complacent about the chance of the outsider; Trump or Brexit. The ‘unthinkability’ of the outcome left them blinded to the potential reality.

WISDOM 💎

It is difficult to make predictions, especially about the future!’ 

Danish proverb

Tip 1 - A SMART PLAY ✅

Be openminded to being wrong. Don’t get married to your theories; the best predictors are the best belief updaters.

Tip 2 - AVOID 🚩

Predicting too far into the future -- it’s almost futile to predict beyond 2-3 years. Avoid predicting things that are unimportant for your life.

Tip 3 - ACTION 💪

What areas are important for you to predict? What is signal and what is noise – what really moves the needle? Do you need to change something, based on your predictions?

‘It’s like Deja vu all over again’ 

Yogi Berra