Thinking in Incorrect Probabilities

“All models are wrong, some are useful” – George Box

In March 2020, the US was first coming to terms with CoVID-19. Everything was rapidly changing and to process it, I started journaling every other day.

I’d recently listened to Annie Duke’s podcast on thinking in probabilities so while journaling, I tried my hand at putting probabilities on future events 3-6 months out. After making 100+ predictions in March-May, I was amazed at how consistently I was wrong

1. On April 7, 2020 I thought there was a 90% chance American sports teams would not play in front of crowds for all of 2020 (NFL played to reduced crowds that year as well as MLB playing in front of crowds during the playoffs)
2. On April 18, 2020 I guessed it was a 75% chance the S&P would be lower by July 1 (it was up ~10%)
3. On April 26, 2020 I gave 70% chance of US increasing taxes by 2025 to pay for increased social services and cost of COVID relief (still TBD on this one)

This experience taught me a few things:  

1. Predicting anything is incredibly hard and our conviction obscures this fact
2. My view of the world is only a tiny and incomplete slice
3. We’re wrong more often then we’d like to believe, but we don’t recognize this because we rarely look back critically at our previous beliefs

But most importantly, being wrong and admitting it is a good thing!

Once we allow ourselves to admit we’re wrong we open up a new door in our search for truth. I gladly admit my 75% prediction the S&P would fall was wrong and my analysis was biased by increasing caseloads. By acknowledging this I am able to incorporate my learning into future decisions & predictions in a more rounded way. Even though we’re afraid of it, being wrong doesn’t need to be a bad thing. Instead it is just one more, (incredibly important) step to growing and learning more. 

Finally, being wrong reinforced the importance of humility. We’re wrong about something almost every day and that’s ok. But when we get into disagreements, be humble. We aren’t guaranteed to be right, and stubbornly insisting others come around to our perspective can jeopardize valuable relationships.