Discover The Art Of Making The Ultimate Forecasts: Superforcasting Explained
Are you tired of making forecasts and being wrong more often than not? Do you have a hunch that your forecasts can be better than they are today? If so, then this is the book for you!
Superforecasting: The Art and Science of Prediction explains how to make excellent forecasts by exploring the complex art of predicting the future.
In this book, you’ll learn why former Microsoft CEO Steve Ballmer predicted accurately about the iPhone’s market share, how one forecaster was able to predict Yasser Arafat’s autopsy results with remarkable accuracy, and why groups of forecasters are even better at making predictions than individual forecasters.
You’ll also discover cutting-edge strategies like trimming and realignment in order to improve your forecasts, as well as how to analyze and improve them once the forecasted event has actually taken place.
Get ready to become an expert in forecasting – an ultimate superforecaster!
The Need For Measurement To Improve Our Forecasting Accuracy
Forecasting is something we all do every day, whether it’s mapping out our future career moves or choosing where to invest our money.
It is essentially a reflection of our expectations about the future.
Unfortunately, forecasting comes with certain limitations; even minor events can cause unforeseen consequences.
Take the Arab Spring as an example.
As enchanting as it might sound, it all started with an act of self-immolation by Mohamed Bouazizi after being humiliated by corrupt officers.
This event, among many others throughout history, serves as proof that a single person has the power to set off big changes in motion.
This phenomenon can be explained through chaos theory (butterfly effect).
According to American meteorologist Edward Lorenz, major weather patterns can be drastically altered due to minor wind shifts – for instance, the flap of a butterfly’s wings all the way in Brazil could possibly lead to a tornado in Texas!
Nevertheless, this doesn’t mean we should just ignore forecasting altogether due to its inherent limitations.
In fact, farmers and meteorologists manage to get relatively accurate forecasts on a daily basis thanks to their habit of comparing their predictions against actual outcomes.
What this proves is that if accuracy measurements become more serious taken within other fields forecast precision will inevitably improve too!
The Importance Of Accurate Forecasting: Understanding The Meaning And Attaching Precision With Numbers
We all know the importance of accuracy in forecasts, but it can also be confusing to measure their precision.
To ensure that your forecast is as precise as possible and avoid any confusion, you must understand what the forecast originally said: not just the general idea behind it, but exactly how it was formulated.
For example, in 2007 Steve Ballmer’s prediction about Apple’s iPhone gaining a significant market share in terms of global cell-phone sales seemed ridiculous at first glance.
But looking at what he actually said—that the device would only gain between two and three percent—the prediction was more or less correct.
In order to make an accurate forecast, one should also be aware of using vague language that could mean different things for different people.
Words such as “could” or “likely” are often used by forecasters, but research shows that people have varying interpretations of these words.
It is therefore important to use numbers, such as percentages or probabilities, to provide greater specificity with regards to chance outcomes of forecasts.
A practical example of this can be seen in the American intelligence agencies’ erroneous conclusion regarding Saddam Hussein: had they specified the chance of Iraq having weapons of mass destruction with precision instead of relying on broad language like “likely” or “probably”, the United States might never have gone through with its invasion plan.
Therefore is essential for any serious forecaster to become accustomed with being precise and avoiding nebulous statements in their predictions.
Using The Brier Score To Measure The Accuracy Of Forecasts
If you want to improve the accuracy of your forecasts, then you must keep score.
This is exactly what the research team in the Good Judgment Project did, encouraging thousands of volunteers to sign up and answer over a million questions over the course of four years.
These volunteer participants were tasked with answering complex questions like “Will the president of Tunisia flee to a cushy exile in the next month?” or “Will the euro fall below $1.20 in the next twelve months?” After reading relevant news, each forecaster would then rate their own probability of foreseeing a successful outcome – and when that time rolled around, their accuracy was measured through something called a Brier Score.
The lower the Brier Score was, the more accurate it indicated that particular forecast was.
And if you got a perfect score of 0, then congratulations – your forecast was spot-on!
It’s important to note though that interpreting Brier Scores also depends on what question is being asked – meaning one could get a 0.2 scre and be hailed as a genius – while another could obtain a 0 score but still lack accurate predictions!
You just never know!
So bottom line: if you want to be sure your forecasts are hitting their mark, make sure to keep score for maximum accuracy.
How Superforecasters Make Accurate Predictions: Fermi-Style Thinking
When faced with an impossible task of predicting the future, Superforecasters take a holistic approach and break down seemingly impossible problems into manageable sub-problems.
This is known as Fermi-style thinking.
Take the example of Bill Flack in the Good judgment Project tasked with guessing whether or not scientists would find elevated levels of polonium in Yasser Arafat’s body.
First, he utilized a technique developed by physicist Enrico Fermi to identify what was knowable and what wasn’t; one cannot come up with an accurate prediction unless they understand the full picture first.
After recognizing that Arafat died years ago and thus there was a chance his corpse won’t test positive for polonium, Flack then conducted deeper research to determine if it could still be detectable.
He then considered other significant factors such as Palestinian enemies who might have wanted choose him, and how a postmortem may have been contaminated to blame Israel for his death.
Flack used this methodical approach to break down each factor step by step until he finally estimated the chance of polonium being found at 60 percent – which it did turn out to be when measured later on after exhumation!
It’s obvious that effective forecasting goes beyond just innate skills or access to top secret information; understanding how to break down complex issues into smaller components is definitely key for superforecasters!
The Key To Making Accurate Predictions Is Understanding The Outside View And Anchoring On A Reliable Base Rate
Superforecasters know that the key to making an accurate forecast is beginning with the outside view.
This means researching and finding out what the base rate of any given situation is, rather than immediately looking at specifics like a particular family’s living situation.
For example, let’s take a look at an Italian family who lives in a modest house in the United States – if you were asked what the chances are of them owning a pet, you would begin by researching what percentage of American households own a pet (outside view) – which is about 62 percent.
Then, if you wanted to get even more specific and adjust that figure accordingly, you could investigate what percentage of Italian families living in America own a pet (inside view).
This reasoning comes from the concept called anchoring – where an initial number serves as your anchor when making adjustments.
And that’s why it’s important to start with the outside view for an accurate forecast.
Skillful Updating Of Forecasts Requires Discriminating Between Relevant And Extraneous Information
When making a forecast, it’s important to not just set it and forget it.
Superforecasters understand the importance of adjusting their forecasts based on new pieces of information.
Take Bill Flack for example – after forecasting a 60-percent chance of polonium being detected in Yasser Arafat’s corpse, he kept his eye on the news and updated his forecast whenever he deemed fit.
He was able to adjust it from 60-percent to 65-percent when he knew that the Swiss research team found polonium but required additional testing to confirm its source.
On the other hand, adjusting your forecast using new information can also be dangerous.
Doug Lorch learned this lesson the hard way when he increased his prediction on whether or not there would less Arctic sea ice in September 15th, 2014 based on a one month old report.
His initial prediction had a 45-percent chance of it being correct, but with the new piece of information it sadly fell to a mere 5-percent as it turned out there was more sea ice than before!
To effectively update and modify your forecasts based on any new piece of information without getting misled like Doug Lorch did, you need to be skillful and careful.
Sifting through irrelevant details and knowing what subtle information really counts is key for superforecasters–both in life and Superforecasting book summary!
The Value Of Critical Thinking And Precision Questioning For Enhancing Teamwork
Working in teams can be incredibly helpful when it comes to forecasting, but only if you do it the right way.
The Good Judgment Project research team discovered that working in teams can lead to better accuracy when forecasting – as long as there is independent expression and thought.
Those who worked in teams were 23 percent more accurate than individuals at the beginning of the study.
The second year, the researchers placed superforecasters in groups, and they found that they vastly outperformed regular groups.
They realized that groupthink could be an issue and cautioned their online groups against it.
However, one superforecaster wasn’t satisfied with the outcome of a lack of critical thinking among the group members.
So they decided to put extra effort into encouraging constructive criticism among all members of the team.
Precision questioning is another great way to make sure you are getting all of the details before coming to a conclusion about something.
This method encourages people to rethink their argument by challenging them for the finer details and by exposing their thought process to further investigation.
When used correctly, precision questioning can make your team more effective when it comes to forecasting; something Socrates used millennia ago!
In conclusion, the Superforecasting book provides an insightful look at how individuals can become skilled at predicting future events.
It lays out that superforecasting is a trainable skill that involves evidence-gathering, score-keeping, staying up-to-date with new information and being patient.
Staying up-to-date with news relevant to forecasts separates superforecasters from regular forecasters, so it’s important for budding forecasters to build a habit of checking in on the latest developments.
Tools such as Google Alerts can be useful in doing this efficiently.
Through understanding the dynamics of forecasting and learning from the best strategies employed by expert forecasters, this book encourages us to approach forecasting with greater confidence and accuracy.