The Folly of Predictions
This is an interesting article about predictions. The bottom line is .. as Yogi Berra said, “It’s difficult to make predictions – especially about the future.”
Enjoy the article, and let me know what you think.
The Folly of PredictionsPosted on 31. Oct, 2011 by Paresh KamdarThe authors of “Freakonomics: A Rogue Economist Explores the Hidden Side of Everything” maintain a blog. University of Chicago economist Steven Levitt and New York Times journalist Stephen J. Dubner use statistics to test many social ideas. I found their recent podcast titled “The Folly of Prediction” to be quite interesting, especially as it relates to investing.The gist of the podcast is something like this: Human beings love to predict the future. Human beings are not very good at predicting the future. Because the incentives to predict are quite imperfect – bad predictions are rarely punished – this situation is unlikely to change.Here is an excerpt that sums up Levit’s view:“So, most predictions we remember are ones which were fabulously, wildly unexpected and then came true. Now, the person who makes that prediction has a strong incentive to remind everyone that they made that crazy prediction which came true. If you look at al