A Fox – Like Approach to Forecasting

A Fox – Like Approach to Forecasting

From Nate Silver’s book The Signal and the Noise

How Foxes think

Multidisciplinary: Incorporate ideas

from different disciplines and regard-

less of their origin on the political


Adaptable: Find a new approach

or pursue multiple approaches at the

same time-if they aren't sure the

original one is working.

Self-critical: Sometimes willing (if

rarely happy) to acknowledge mistakes

in their predictions and accept the

blame for them.

Tolerant of complexity: See the uni-

verse as complicated, perhaps to the

point of many fundamental problems

being irresolvable or inherently unpre-


Cautious: Express their predictions in

probabilistic terms and qualify their


Empirical: Rely more on observation

than theory.

Foxes are better forecasters.

For forecasting principals:

  1. Think Probabilistically

  2. Today’s forecast is the first forecast of the rest of your like (ie, be willing to update forecasts as more information is known and noise is separated from the system). Aka, think marginally, don’t be the victim of the endowment effect. (I.e., assigning ownership value to the current forecast)

  3. Look for consensus – there is evidence that group forecasts are more accurate than individual ones. Though, the group doesn’t alleviate the responsibility to think critically. Eg, the consensus economic forecast in 2006 was the housing market was strong and would continue to be stable well into the future….

The 2nd principal reminds me of Fratto’s thoughts on adaptability.

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