Practicing predictions (Mental models IX)

Predicting is hard, especially the future, as Yogi Berra supposedly pointed out. But it is interesting – but not necessarily for the reasons we originally think. Predicting the future is interesting not because you want to find out if you are right, but you want to use the predictions you make to tease out the narratives that are organizing your understanding of the world.

I have started to run a predictions journal for myself and the way that I have structured it is that I am looking at a prediction, assessing the probability and then writing out the narratives that I use to fix on that probability. It is really interesting in that it forces me to not just blurt out a percentage probability, but really ground it. And in doing so I also need to examine my own thinking.

Take a simple example: one of the predictions I wanted to assess was the likelihood that the stock market drops 30% before end of May this year. I assess that as a 15% probability, but I started out assessing it as 2-3% probability, because I felt it very improbable. Then I wrote out the narratives, and they started to feel jarring to me.

I increasingly felt, as I was writing, that I underestimated the risk based on one single narrative – that there are no alternatives to the stock market right now. On the other hand I strongly believe that the stock market is over-heating and that the support packages provided during the pandemic have artificially inflated share prices to at least some degree. It is just hard to see how, and a 30% drop feels a lot.

My prediction template in Roam and the beginning of the narratives I am writing out.

So I stuck to my view that it is unlikely, but corrected – when I read my own narratives, the probability from 3 to 15%, which is a huge leap. I do think the poverty of my narrative made me overreact, and if I come back to and update this prediction I think I will probably be adjusting it down.

There is an interesting misunderstanding around narratives – that they are just stories. That writing out the narrative that underpins your belief is just an exercise in justification and that you will not find anything in those narratives — but that is, I think, very misguided. Writing out a narrative is not making up, it is exploring and discovering.

The reason is that when you write out a narrative you split yourself into two: the writing self and the scrutinizing self. This is why most people who want to become writers never do – they give too much space to the critical self, and give up, judging their own first drafts too harshly (first drafts are, as Hemingway reminds us, always sh*t so don’t do that – write away). That judging is at play also in writing out non-fiction narratives, and you will not let yourself get away with easy solutions. Between the writing and the judging self you can explore the set of beliefs and narratives that you exist in.

Narrative is an instrument, a tool that uncovers cognitive structures governing you.

So practicing predictions through writing out the narratives that underpin them is a way to discover the world you live in.

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