So, you are an analyst who blew a forecast. You thought you had found a gem and it turned out to be turd. You were so confident in your forecast that you went on CNBC and articulated your beliefs. You know you can be persuasive when you want to be. But now investors who followed your advice are baying for your blood. What do do now? Here’s a ready cheat-sheet for those awkward moments:
- The ‘if only’ defense: Claim that you would have been correct ‘if only’ your original advice had been followed. For example: if only the RBI had cut rates, or if only FDI in e-commerce was allowed, etc. This makes your forecast an historical counterfactual, which is impossible to prove.
- The ‘ceteris paribus‘ defense: Your Rs. 40,000 target for gold is right and the analysis is solid. The government manipulated the market.
- The ‘I was almost right’ defense: The stock would have been a 10-bagger if not for the management blowing it by idiotic acquisitions. Of if you had a ‘sell’ rating: “They would have gone bankrupt but their competitor bought them out.”
- The ‘It just hasn’t happened yet’ defense: Just you wait – the Indian government is run by a bunch of fools and soon gold will be at Rs. 40,000.
- The ‘single-prediction’ defense: The analysis is valid, but the forecasting was flawed. Don’t shoot the messenger.
Source: Tetlock: Are we prisoners of our misconceptions?
Previously:
A dose of realism
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