How To Make More Accurate Predictions

Any time you’re making long-term plans based on more than your own behaviour, you need to remember just how unpredictable the world is. It can be hard not to get carried away, especially if you have lots of “good” data to base your plans on. The Collaborative Fund blog lists 12 things to keep in mind when making plans and predictions. While the blog focuses mostly on investment predictions, these are good principles to remember in any kind of planning. Our favourites:

“Your willingness to believe a prediction is influenced by how much you need that prediction to be true.”

This is a filter we apply to all kinds of knowledge. It’s why people cling to bad political beliefs, or fall for quacks promising miracle cures. And it can make you depend on predictions that imply good outcomes for you. Don’t accept some news as true just because you’re screwed if it’s wrong.

Don’t, for example, convince yourself that drinking is good for you because you read a few cherry-picked studies. The research shows pretty consistently that alcohol causes cancer, and while it’s OK to decide the risk is acceptable, you should know about that risk.

“Predicting the behaviour of other people relies on understanding their motivations, incentives, social norms and how all those things change.”

You can only accomplish your own goals by figuring out what other people’s goals are. And that is a very complicated task. “Part of why predicting something like the economy is difficult,” says the Collaborative Fund’s Morgan Housel, “is because you have private-school-educated economists earning seven figures trying to understand the spending behaviours of a total population, 78 per cent of whom live paycheck to paycheck.”

This is one of the many reasons that organisations should be as diverse as the populations they serve. Innumerable failed consumer products, services, non-profit outreaches, and government programs can be traced back to an all-male or all-white team that couldn’t predict the needs and desires of people who don’t resemble them. There is so much you can’t guess about what other people want, that you don’t even know what you don’t know.

In your personal life, that means not relying on your own desires to predict those of your loved ones. It means thinking about what might motivate your employer to promote you or lay you off. It means thinking about what might offend or encourage someone with a different life experience than yours.

These principles aren’t surprising, but you can spend so much of your life ignoring them if you don’t pay attention. So read the whole piece for a refresher.

The Psychology of Prediction | The Collaborative Fund