All my life I’ve been forecasting financial markets – first at big banks like JPMorgan, Deutsche Bank, and Nomura, and now at my own research firm – Macro Hive. Throughout, I’ve always felt like it’s a fool's errand. Can I seriously predict the future? In the end, I make peace with myself that my objective is not always to be right, but to be right more often than being wrong. But more importantly, the fear of being wrong is always driving me to research how to become a better forecaster.
As it happens some of the best work in this area has been done by the American Political scientist Philip Tetlock. He summarised his work in the excellent book called “Superforecasting: The Art and Science of Prediction“. In the book, he lists ten commandments to forecasting well, which include
Focus on questions where your hard work will pay off.
Break big problems into smaller ones.
Strike the right balance between inside and outside views.
Strike the right balance between under- and overreacting to evidence.
Acknowledge the counter-arguments.
I run through these and the rest in this podcast.
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Bilal