the holiday break, I read a great book. Philip
Tetlock’s Superforecasting was released this fall and has powerfully positive implications
for Vetr. The book summarizes a study
that, in its scientific nature, measured the forecasts of experts and
the crowd to determine their accuracy.
Many people, including experts like Wall Street analysts, make forecasts
that are well covered in the press but are never measured. There are issues with having forecasts be
precise enough so they can be measured, but the study underlying
Superforecasting shows that some people are better at forecasting than others
(hence, “superforecasters”). In fact,
generally “experts” like Wall Street analysts forecast no better than random
Most of the questions in Tetlock’s study relate to political
events. There is very little about
financial markets. In one spot, Tetlock
suggests the financial markets are very efficient because of the constant
second-guessing that goes on in them.
“It is still very hard to consistently beat markets, which is why so few
can plausibly claim to have done it.”
He then goes on to discuss “prediction markets,” like “will Hillary be
elected President in 2016.” Here, good
forecasting teams do better than would be predicted which is the point of that
chapter—some forecasting teams are really good.
“The results were clear-cut each year. Teams of ordinary forecasters
beat the wisdom of the crowd [defined as the average of those participating] by
about 10%. Prediction markets beat ordinary teams by about 20%. And superteams
beat prediction markets by 15% to 30%.” [If I read this correctly, the markets
should beat the crowd average but he doesn’t say this explicitly, and it hasn’t
been tested against financial markets from what I could tell.]
So, the good news: By helping discover superforecaster
investors, Vetr can provide more insight than so-called Wall Street experts.
So, find the good Vetterers or, even better, become one
Patrick Williams, President at Vetr.com