Super Forecasting

When the Queen of England visited London School of Economics in 2008, here question to the economists was, “why nobody noticed it?” They failed to predict the financial crisis of 2008.

There is lots of research done in the past in economic forecasting and there is still lot of ongoing work to predict the future. However, most of the research goes in vain. Still, we read them on daily basis. After all, we want someone else to confirm our biases.

Most of them go wrong because of the bad data or the poor modelling. In today’s world, information is cheap whereas attention is expensive. That’s why you only see the things you like in the feeds. It is difficult to have the counter intuitive approach like Darwin’s. After forming his decision, he looks for the objections, collecting them passionately. Whereas in today’s digital first world, we only see feeds which we like not the one we dislike. Additionally, it is hard and painful in the present conditioning, unless one changes the mindset.

The record of failure to predict recessions is virtually unblemished.

Prakash Loungani, Macroeconomist

Further as the world gets more complex , it will be way more difficult to predict correctly.

The TV analyst keep on making predicts on daily basis. Sometimes they say the rise is due to the rise in interest rate and a year later you will find the same reason for the decrease in the stock prices. We listen to them that’s why they keep on making the predictions. The day we stop listening to them, will be their last day of prediction. However, we don’t after all we want someone to tell us the reason of the rise/fall in prices. It all boils down to the mindset.