Do not mistake a confident explanation for an accurate prediction. An engineer can predict how much weight a steel bridge will hold and you can be quite sure reality will match their calculation. That's an accurate prediction. Meanwhile, strongly held opinions about what will happen in markets or sports or politics have little predictive power. A lot of what you hear can be summarized as: confident, but inaccurate. (Inspired by a recent conversation with Morgan Housel.)
Bob Miller
3w
With an actual bridge, the reality can change over time due to corrosion, vibration, etc.
This is what we call complicated vs complex problem. An expert can solve complicated problem - accurate prediction. While the complex problem can’t be solved by an expert as it has multiple inflection points and depends on many moving parts - making confident explanations is maybe relevant in a given moment, but maybe not as a final solution to the problem.
James Clear oh yes I’ve learnt this the hard way especially in financial markets. I think it’s human nature to want to control and predict things and hence we rely too often on analysts, economists and the like, despite their terrible track records. The reality is that neither you not any of these folk can predict accurately & while that’s disappointing there’s a solution- invest in a broad based index fund and you can’t go wrong in the long term. 👌😜
This reminds of the handicapper fallacy, based on the study where professional horse race handicappers were asked to predict race outcomes using varying amounts of data. Whether they used five, ten, twenty, or forty pieces of information, their accuracy remained consistent - but their confidence soared with more data, even though it didn’t improve their predictions.
Having full conviction in your opinions and backing them with logic (and data, if possible, as past data might not reflect future trends in the markets) is what matters above the accuracy, so that even if you go wrong at least you had done whatever you could've done the best.
Saira Malik
3w
We should always be willing to question and test our opinions and thesis.
John Kuder
3w
Another aspect of your first sentence is that an explanation is often looking toward the past (what happened) or describing a known process, while a prediction is looking toward the (unknown) future. In that sense, apples and oranges.
Arun Garg
3w
Recently experienced this for myself in the Indian Election Results. All the pundits, analysts, social media echo chambers were proved grossly wrong by the electorate. Personally lost a bet. But gladly my hubris that was built on borrowed conviction was shattered. Another experienced gained. Came out better and wiser.
Keith Andes
3w
that's fair. It's also fair to say more knowledge/information about the subject can improve the accuracy of predictions. Confidence on the other hand is what spreads predictions... it makes it more compelling but not more accurate 😁
Writer at JamesClear.com
4wThis idea is from today's edition of my 3-2-1 Thursday newsletter. Each one features 3 short ideas from me, 2 quotes from others, and 1 question for you to ponder. You can see more of today's newsletter (and sign up to get it in your inbox) at https://jamesclear.com/3-2-1