there are five steps in improve my prediction skills
A great prophet has: way above normal people’s judgement, great insights of all things, can correctly predict what will happen based on what just happened for the time being.
SO HOW CAN YOU IMPROVE YOUR OWN PREDICTION SKILLS?
Zweig lays out these 5 Steps to improving your prediction skills:
Compare. Establish the “base rate,” the typical historical frequency or severity of the outcome you are trying to forecast, by picking a reference class of similar past events. Very few situations are unique; think deeply enough about the instance at hand, and you will likely discover a set of historical precedents for it. Instead of guessing how stocks will do if interest rates rise by one percentage point, for instance, look at the full sample of all such past interest-rate increases, take the average of subsequent stock performance and use that as your base-rate assumption.
Try to flush your ignorance out into the open: Don’t just say, “I think emerging-markets stocks are cheap right now.” Instead, say “There is an 80% probability that emerging-markets stocks will go up at least 25% in the next 12 months.” When significant new information comes in, adjust your forecast incrementally.
Invert. Consider the opposite and ask what information you would need if you were trying to make a case that emerging-markets stocks will go down at least 25% in the next 12 months. Then seek it out, absorb it and test whether you need to revise your original forecast.
Find a variety of sources for news and analysis, varying widely in their viewpoints, vested interests and geographic origin. Discount the sources that use the self-reinforcing language of overconfidence: Words like “furthermore,” “clearly” and “certain” or “impossible.” Heed most closely those sources that admit uncertainty with words like “however,” “but,” and “on the other hand.”
Record in detail the reasoning behind your forecasts. When you turn out to be right, don’t just celebrate; check your records to see whether you were right for the reasons you predicted or whether you just got lucky. When you turn out to be wrong, compare this error to the other times you were mistaken, looking for patterns to correct. If you don’t measure every meaningful aspect of your forecasts, you will never improve.
FURTHER READING
You can read Zweig’s original WSJ post here: Can You See the Future? Probably Better Than Professional Forecasters and his 5 step guide here
Hone your skills by visiting GJOpen.com and joining the next round of the tournament, and get free training materials like this one.
Finally, you can take a spin through Tetlock and Gardner’s new book “Superforecasting: The Art and Science of Prediction.” Zweig writes that “Superforecasting” is the most important book on decision making since Daniel Kahneman’s “Thinking, Fast and Slow.” And Prof. Kahneman agrees. “It’s a manual to systematic thinking in the real world… This book shows that under the right conditions regular people are capable of improving their judgment enough to beat the professionals at their own game.” (I haven’t read the “Superinvestors” book yet — it was just released on Sept. 29th — but I have read “Thinking, Fast and Slow,” which was an excellent book on decision making and behavioral economics).
resource: http://vintagevalueinvesting.com/5-steps-to-improving-your-prediction-skills/
