The Psychology of Prediction
This article is a part of my Best Reads of the Month section on my website www.mikegorlon.com. Each month I pick one or two articles or blog posts that I find on the internet which I thought were really insightful, interesting or moving. Then I share them with you. You can view the previous month’s articles by going to: https://www.mikegorlon.com/best-reads-of-the-month
July 2019: The Psychology of Prediction
The future is uncertain and making predictions are hard yet we all need to make some predictions in order to better prepare for it. If you think predictions are easy then you are in denial. Predictions involve a lot of known and unknown information, bias, and moving variables that can result in your prediction to change from one outcome to another over the course of a couple hours or days depending on the time frame and on the new information that becomes available.
In this month’s Best Reads of the Month, Morgan Housel describes 12 of the common flaws, errors, and misadventures that happen inside people’s heads when they make predictions.
Here are some parts that I found insightful:
“It is hard to think of the history of the twentieth century, including its large social movements, without bringing in the role of Hitler, Stalin, and Mao Zedong. But there was a moment in time, just before an egg was fertilized, when there was a fifty-fifty chance that the embryo that became Hitler could have been a female. Compounding the three events, there was a probability of one-eighth of a twentieth century without any of the three great villains and it is impossible to argue that history would have been roughly the same in their absence. The fertilization of these three eggs had momentous consequences, and it makes a joke of the idea that long-term developments are predictable.”
“Credibility is not impartial: Your willingness to believe a prediction is influenced by how much you need that prediction to be true. If you tell me you’ve found a way to double your money in a week, I’m not going to believe you by default. But if my family was starving and I owed someone money next month that I don’t have, I would listen. And I would probably believe whatever crazy prediction you have, because I’d desperately want and need it to be right.”
“Predicting the behavior of other people relies on understanding their motivations, incentives, social norms and how all those things change. That can be difficult if you are not a member of that group and have a different set of life experiences.”
