Executive Summary
Everyone is graving for knowledge of the future especially due to the uncertainty of the markets. People have developed predictive models some using statistical algorithms and big data. Forecasting that is a combination of experts and machines is better than using pure humans or machines. Tetlock and Gardener in the book Superforecasting: The Art and Science of Prediction argued that its time everyone get serious about both (Tetlock & Gardener p.24). Foresight is not an inherited mysterious gift rather it is a product of updating beliefs, gathering information and ways of thinking. It, therefore, means that to accurately forecast one has to critically analyze a great wealth of information and be ready to learn from others.
The two provides a tutorial called Good Judgment Project that is summarized in the eleven commandments for anyone wishing to learn about accurate forecasting. Even the smallest improvements accumulated over time makes much difference. The book compares a consistent successful person who makes a living with another person who goes broke every time. Apparently it does not focus on financial markets because the authors are quite cognizant that life is full of aleatory uncertainty which ensures that life is filled with surprises regardless of the way humans plan. Superforecasters understand this reality better than anyone else. When faced with questions of irreducible uncertainty such as currency market questions they try to be cautious and keep their initial estimates between 35% and 65% but do not throw their hands and estimate it at 50-50. The book teaches readers to think probabilistically, and it does not just come naturally for many people. Most people tend to categorize events into three; it will happen, it will not happen, or it may happen. It will, and it will not happen is another fixed way of thinking. One need to subdivide into finer details, the degrees of probability.
Analysis
Good Judgment Project is a simple model of becoming a superforecaster. Superforecasters never make mistakes that many common people make such as substitution of simple questions with difficult ones. For example, was Yasser Arafat poisoned by Israel? To anyone holding a particular view, such a question may seem so obvious. Superforecasters are flexible and ready to change their forecast if they get new evidence, and they do not fear to damage their ego. They naturally look more knowledgeable compared to the common population because they present themselves as having a higher intelligence quotient. Ideally, they are not much knowledgeable compared to other people, but it is the way they keep testing new ideas. Tetlock describes them as "Perpetual beta" people who are ready to go out of their way to try new challenges without fear of failure (Tetlock & Gardener p.155).
Also, there is need for intellectual humility if one desires to have good judgment. Human judgment will always be riddled with mistakes, and so there is no need to praise oneself by only getting a forecast right. To learn, one need to acknowledge that he is unworthy, unintelligent and talented because the reality is a complex idea that requires people to constantly struggle to see things more clearly (Tetlock & Gardener p.174). Without humility, it is impossible to learn from experience and expertise of others because there is a feeling of self-sufficiency and contentment.
The book does not ignore Taleb’s black swan theory, an idea that has become common among many investors. Superforecasters only questions most of the assertions made by Taleb. For example, it points out what the intelligence circle knew before the September 11, 2001, terrorist attack (Tetlock & Gardener p.201). The authors argue that most of the black swan events are predictable contrary to Taleb’s point of view. Furthermore, he claims that history does not always jump but chugs along and can be altered so that it is forecastable. It might be difficult to predict exactly a black swan event, but it is possible to make an informed decision that can reduce the negative impact of the event. For example, if the 2001 terrorist attack had been predicted or at least detected that it might occur, appropriate measures would have been put in place to avoid the devastating impacts of the event. Although the event would not have been predicted right at least, there would have been intelligence report of a likely security bridge, and the security apparatus would have adequately prepared to mitigate.
The book manages to enlighten and entertain at the same time. It has simplified highly complicated concepts making them easily understandable. By citing case studies and real world events, it retells the recent history of prediction and thinking. It is, therefore, a recommendable book not just for investors wishing to sharpen their investment skills but also for people who wish to engage with the real world in an open and agile manner (Tetlock & Gardener p.221). The reality that is well explored in this book is that prediction is both art and science that is why it begins by saying that people need not only to focus on machines or humans but a combination of both. Nobody is born a forecaster and forecasters can always learn and improve to become superforecasters only if they are humble and ready to learn.
Works Cited
Tetlock, Philip E, and Dan Gardner. Superforecasting: The Art and Science of Prediction. N.p., 2015. Print.
