How Charlie Munger sees the future 60% better

Superforecasting is a big story. Once I started “pulling the thread” I realised there was a lot that needed to be said about it.

This day last week, I sat down to write one email about superforecasting. One week and three emails later, I’m still going. It got away from me!

Superforecasting is a big story. Once I started “pulling the thread” I realised there was a lot that needed to be said about it.

If you haven’t read the first two emails you can read them here and here. And here’s a summary, either way.

“Superforecasting” is the outcome of an experiment funded by the CIA in the aftermath of the Iraq war. The goal of the experiment was to systematically study forecasting skills, so we could learn from the best. The method was to run a giant forecasting tournament in which the participants made a forecast roughly once a day, over the course of years. The questions were wide ranging and specific. They asked about currency prices, revolutions, arctic sea ice and more besides.

Lots of different teams entered the tournament. There were academic forecasting specialists, ordinary people (thousands of them, paid with a $250 voucher) and elite CIA analysts with access to confidential information.

After a year, it was clear that one group in the tournament were whipping the competition.

The superforecasters.

The superforecasters were the best performing forecasters out of the thousands of ordinary volunteers in the project.

They weren’t academically trained, and they didn’t have any inside information that couldn’t be found in the New York Times. But their forecasting accuracy was amazing. They were 60% more accurate than the average forecaster and 30% more accurate than the CIA forecasters.

The organisers of the tournament set about studying them to find out what made them so good.

So, with a little help from Charlie Munger, here are five of the most important attributes of a superforecaster.

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Charlie Munger the clairvoyant

As I wrote last week, Warren Buffett’s business partner Charlie Munger is the living embodiment of superforecasting. Here are Munger’s takes on the five most important traits of a superforecaster, as laid out in a recent Credit Suisse research note.

Be cautious, for nothing is certain.

Munger: “You must force yourself to consider arguments on the other side.”

Be humble, for reality is infinitely complex.

Munger: “What I’m against is being very confident and feeling that you know, for sure, that your particular intervention will do more good than harm given that you’re dealing with highly complex systems wherein everything is interacting with everything else.”

Be intellectually curious and open-minded.

Munger: “You can progress only when you learn the method of learning.”

Value diverse views and synthesise them into your own.

Munger: “It’s kind of fun to sit there and out think people who are way smarter than you are because you’ve trained yourself to be more objective and more multidisciplinary.” “I would argue that what Berkshire has done has mostly been using trivial knowledge…if you absorb the important basic knowledge…and you absorb all the big basic points across a broad range of disciplines, one day you’ll walk down the street and you’ll find that you’re one of the very most competent members of your generation, and that many people who were quicker mentally and worked harder are in your dust.” “Isn’t reality multidisciplinary, so that you have to use the tools of all the disciplines to solve the complex problems?”

Believe it’s possible to get better.

Munger: “Your brain doesn’t naturally know how to think the way Zeckhauser knows how to play bridge. That’s a trained response.”

I think it’s encouraging. Getting smarter, and predicting the future better, is hard… but it’s possible! An early resolution for 2016. Have a great Christmas!

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