The Psychology of Prediction (Psychology)

[Guest guest]

Dear All, The following is from: http://blogs.gartner.com/david_m_smith/2009/09/02/the-psychology-of-prediction/Love and regards,Sreenadh========================The Psychology of Prediction According to one of my favorite philosophers, Yogi Berra, Its hard to predict, especially the futureâ€. He’s right but it doesn’t stop many people from trying. In fact predicting the future is essential to many aspects of our lives – in business, and beyond. Many professionals have the need to accurately predict outcomes of the future to be successful in their jobs. And many have occupations where predicting the future actually is their job, one way or another. As an analyst at Gartner, I am of course a good example of this. Some of this is common sense. Some is controversial. Some goes completely against what most think and against what people are taught even at organizations who train people to do predictive type jobs. But it works for me. Here are my ten guiding principles for accurate prediction: 1. Care about being right. This sounds obvious but circumstances and other requirements often get in the way. Professionals whose job involves making predictions face pressures to have an opinion, no matter what, and to generate visibility. This can lead to quickly formed opinions and overstating and over hyping things. While these things may in fact need to be part of a strategy, they do not have to be the primary goal. Tempering such behavior by placing the goal of being right at a higher priority is one of the real keys to accurate prediction. You can’t be afraid to be wrong, but you can’t place being right at lower priority and expect to be good at predicting. 2. Be an “innumerateâ€. Be extremely skeptical of any numbers. Many believe that numbers don’t lie. They don’t of course, but people do. And they state the numbers that they want to state to make their case. And they get things confused. Numbers are more useful in looking back at history than in predicting (looking back at history is helpful and numbers can help). Be especially wary of survey data. Often the questions are poorly formed and the respondents not necessarily knowledgeable. There is no substitute for talking directly to people to make sure that you understand context and that they understand the question. And follow-up is possible. 3. Ask yourself “Why are they telling me this?†Understand the motivations of sources of information. Everyone you meet has some type of agenda. Sometimes it is truly to educate you, usually not. It is critical to understand what the source of information wants you to think to put the information into context. 4. Ask yourself “What would I doâ€? Put yourself in the shoes of the CEO or key decision maker of the entity if possible. This is a key tool to predicting how companies and organizations will behave. If the prediction is about that company, this is the major key. If it is more general, putting yourself in the shoes of multiples and playing out scenarios is helpful. 5. Recognize that most of the time, you will know less than your sources. The world is full of specialists. Depending on circumstance, you may know as much as your sources but there is almost always someone who is more of an expert than you. So you need to develop strategies for assessing the credibility and honesty of a source. A useful tactic is to lead a discussion towards an area in which you do know a lot and test the source’s honesty and credibility. This can help determine what weight to give the source 6. Don’t jump to conclusions. Whenever possible take your time. When pushed for an opinion, it is best to say “if I had to have an opinion I would lean towards xâ€, but not highlight these types of things as “predictionsâ€. 7. Find “bubblesâ€, conventional thinking and poke at assumptions. Try to understand why most people have a certain belief and figure out what assumptions they have. Look for misunderstandings, confusion, motivations and social trends. 8. Get information you’re not supposed to have. Basic networking is essential to knowing your subject and to getting information you’re not supposed to have (Obviously those subject to “insider trading†types of issues need to tread carefully here). Listen for slip ups. Put the pieces together. Fill in the holes. Speculate. 9. “You’re only paranoid if you’re wrongâ€. Explore conspiracy theories. While they usually won’t be the prediction, the exercise of examining possible conspiracy theories often is fruitful. Remember At the very least there is bound to be some aspect of the theory that has some truth to it and may point the way towards a good prediction. However, it is far more likely that stupidity or laziness, rather than conspiracy, is the cause. 10. Constantly test, validate and refine. Every chance you get to talk to a person whose opinion you respect, test new theories. Every chance you talk to a source of information, test your theories and gauge their reactions. Be open to tweaks. Some other principles that I always test against: - Simple is better than complex - People (especially politically oriented people) have to be able to declare victory - Understand when there is “skin in the game†and when logical reasoning will not explain everything - Fear and Greed are the ultimate forces driving everything Note, I wrote this several years ago as part of an internal exercise here at Gartner. At the time, there wasn’t an appropriate mechanism to share this. Now, with our blogs, the time is right. Enjoy and don’t be shy to comment.========================

[Guest guest]

Dear All, The following is from: http://www.psywww.com/intropsych/ch01_psychology_and_science/correlation_and_prediction.html Note: This mail contains an brief version of that article. Please check the original link to read in detail.Love and regards,Sreenadh=============================== Correlation and Prediction The evidence produced by observational research is called correlational data. Correlations are patterns in the data. For example, Stern found that mothers who synchronized their movements with a baby's movements had better rapport with the babies, defined as less crying and more laughing and smiling by the baby. Mothers with serious mental problems such as depression often did not show the mother-baby dance. They were literally "out of synch" with their own children. Their children were more likely to be irritable and to suffer from developmental problems. The technical term for such a coincidence is a correlation. "Co-relation" means essentially the same thing as "co-incidence" or things occurring together. Correlations, observed patterns in the data, are the only type of data produced by observational research. Correlations make it possible to use the value of one variable to predict the value of another. For example, using Stern's finding, one might predict that mothers who fail to do the mother-baby dance will have babies who fuss and cry significantly more than other babies. The predictive power of correlations can be very great, if the correlation is a strong one. Any type of correlation can be used to make a prediction. However, a correlation does not tell us about the underlying cause of a relationship. There can be hundreds of possible explanations for a correlation: the number is limited only by your imagination and ingenuity in thinking up possible reasons for a relationship between two variables. For purposes of making a prediction, the underlying reason for a correlation may not matter. As long as the correlation is stable -lasting into the future-one can use it to make predictions. One does not need an accurate cause-effect explanation to make a prediction. As long as a "pattern" (correlation) continues into the future, we can use it to make a prediction, whether or not we understand it. What a correlation does not tell you is why two things tend to go together. One should make a clear distinction between the usefulness of correlations for predictions (which requires no theory) and the testing of speculations or theories about why the correlations exist (which may require many research studies). Correlations are very important, because they allow prediction. However, a correlation does not tell you about causality. In other words, it does not tell you about the underlying events that created the relationship. Correlations are useful even if we have no theory to explain them. That does not matter if all we want to do is make predictions. All we need is a reliable correlation. ===============================-sreesogSent: 10/15/09 05:58 pmAIAThe Psychology of Prediction (Psychology) Dear All, The following is from: http://blogs.gartner.com/david_m_smith/2009/09/02/the-psychology-of-prediction/ Love and regards,Sreenadh ======================== The Psychology of Prediction According to one of my favorite philosophers, Yogi Berra, Its hard to predict, especially the futureâ€. He’s right but it doesn’t stop many people from trying. In fact predicting the future is essential to many aspects of our lives – in business, and beyond. Many professionals have the need to accurately predict outcomes of the future to be successful in their jobs. And many have occupations where predicting the future actually is their job, one way or another. As an analyst at Gartner, I am of course a good example of this. Some of this is common sense. Some is controversial. Some goes completely against what most think and against what people are taught even at organizations who train people to do predictive type jobs. But it works for me. Here are my ten guiding principles for accurate prediction: 1. Care about being right. This sounds obvious but circumstances and other requirements often get in the way. Professionals whose job involves making predictions face pressures to have an opinion, no matter what, and to generate visibility. This can lead to quickly formed opinions and overstating and over hyping things. While these things may in fact need to be part of a strategy, they do not have to be the primary goal. Tempering such behavior by placing the goal of being right at a higher priority is one of the real keys to accurate prediction. You can’t be afraid to be wrong, but you can’t place being right at lower priority and expect to be good at predicting. 2. Be an “innumerateâ€. Be extremely skeptical of any numbers. Many believe that numbers don’t lie. They don’t of course, but people do. And they state the numbers that they want to state to make their case. And they get things confused. Numbers are more useful in looking back at history than in predicting (looking back at history is helpful and numbers can help). Be especially wary of survey data. Often the questions are poorly formed and the respondents not necessarily knowledgeable. There is no substitute for talking directly to people to make sure that you understand context and that they understand the question. And follow-up is possible. 3. Ask yourself “Why are they telling me this?†Understand the motivations of sources of information. Everyone you meet has some type of agenda. Sometimes it is truly to educate you, usually not. It is critical to understand what the source of information wants you to think to put the information into context. 4. Ask yourself “What would I doâ€? Put yourself in the shoes of the CEO or key decision maker of the entity if possible. This is a key tool to predicting how companies and organizations will behave. If the prediction is about that company, this is the major key. If it is more general, putting yourself in the shoes of multiples and playing out scenarios is helpful. 5. Recognize that most of the time, you will know less than your sources. The world is full of specialists. Depending on circumstance, you may know as much as your sources but there is almost always someone who is more of an expert than you. So you need to develop strategies for assessing the credibility and honesty of a source. A useful tactic is to lead a discussion towards an area in which you do know a lot and test the source’s honesty and credibility. This can help determine what weight to give the source 6. Don’t jump to conclusions. Whenever possible take your time. When pushed for an opinion, it is best to say “if I had to have an opinion I would lean towards xâ€, but not highlight these types of things as “predictionsâ€. 7. Find “bubblesâ€, conventional thinking and poke at assumptions. Try to understand why most people have a certain belief and figure out what assumptions they have. Look for misunderstandings, confusion, motivations and social trends. 8. Get information you’re not supposed to have. Basic networking is essential to knowing your subject and to getting information you’re not supposed to have (Obviously those subject to “insider trading†types of issues need to tread carefully here). Listen for slip ups. Put the pieces together. Fill in the holes. Speculate. 9. “You’re only paranoid if you’re wrongâ€. Explore conspiracy theories. While they usually won’t be the prediction, the exercise of examining possible conspiracy theories often is fruitful. Remember At the very least there is bound to be some aspect of the theory that has some truth to it and may point the way towards a good prediction. However, it is far more likely that stupidity or laziness, rather than conspiracy, is the cause. 10. Constantly test, validate and refine. Every chance you get to talk to a person whose opinion you respect, test new theories. Every chance you talk to a source of information, test your theories and gauge their reactions. Be open to tweaks. Some other principles that I always test against: - Simple is better than complex - People (especially politically oriented people) have to be able to declare victory - Understand when there is “skin in the game†and when logical reasoning will not explain everything - Fear and Greed are the ultimate forces driving everything Note, I wrote this several years ago as part of an internal exercise here at Gartner. At the time, there wasn’t an appropriate mechanism to share this. Now, with our blogs, the time is right. Enjoy and don’t be shy to comment. ========================